Comparing VA Loan Interest Rates

08 Mar Comparing VA Loan Interest Rates

Known for having the lowest VA loan interest rates in the market, VA mortgages are loan facilities available to all active/former military members, family members and some selected spouses. These facilities are backed by the US Department of Veteran Affairs and are designed to help Veterans get a foothold in the civilian lifestyle. In addition to having highly competitive rates, these loans also offer some remarkable benefits like 0 down payment options, no PMI requirement and flexible guidelines.

Benefits Of VA Loans

Because these loans are backed by the VA, they have a multitude of benefits and generous terms and conditions, unlike the conventional loans available in the market.

Following are some benefits of VA mortgages-

1.  The VA guarantees to offer these facilities at no down payment options unless the purchase price of the property exceeds the loan limit provided by the department.
2. These loans do not require the applicants to pay any Private Mortgage Insurance (PMI).
3. The VA ensures that the VA loan interest rates offered by the private lenders are competitively low as compared to the conventional loans available in the market.
4. Closing costs are comparatively low and, in some cases, paid by the sellers.
5. There is no pre-payment penalty associated with the mortgage if borrower pays back the loan prior to the deadline.

What Makes These Interest Rates Low?

VA home loans are guaranteed by the VA, meaning that if the borrower defaults in any way, the department will be liable to pay back a fraction of the amount to the lender. This guarantee enables lenders to provide mortgages at highly competitive rates and the lowest credit scores.

Although the private lenders determine the VA loan interest rates, the department ensures that the rates are relatively low and affordable.

Factors That Determine The Rates

The private lenders determine the interest rates after analyzing a variety of factors like-

1. Duration of the loan (15 or 30 years)
2. Type of loan (VA purchase loan or IRRRL or VA cash-out refinance )
3. The financial condition of the applicant (Residual income, credit score)
4. Market conditions like changes in the job sector, inflation and mortgage market.

Interest Rates For VA Home Loans

VA loan interest rates are never stable. They are always fluctuating and might change several times a day.

However, here’s an average estimation of what your interest rates would look like if you opt for VA mortgages-

If you want to opt for VA purchase loan, your interest rates might range from 2.875%-2.500%. In case of IRRRL and VA cash out refinance, the interest rates might range up to 2.900% to 2.500%.

Comparing VA Loan Rates With Conventional Loan Rates

According to the research, the VA loan interest rates have always been the lowest in the market. Recently, the VA rates were 4.27% as compared to 4.5% for conventional loans. This might not seem like a huge difference but can account for some major savings in the long run.