How Are VA Loan Rates Calculated?

How Are VA Loan Rates Calculated?

If you are a Veteran or a service member in National Guards or Reserves, you don’t need to have huge savings to purchase your dream home. The VA home loan benefits can help you own a home without stress. The Department of Veterans Affairs offers home loans to eligible veterans at a zero down payment.

As you don’t need to manage an upfront cost to get the loan, you can use that money for other purposes, like home improvements or funding your child’s education. The VA has helped nearly more than 20 million service members & Veterans to get a home through its VA loan initiative.

The VA Backs The Loan.

Your VA home loan is guaranteed by the VA. The VA only backs a portion of the loan provided by VA approved private lenders. As the VA assures the lender that a part of the loan will be repaid if the borrower fails to make monthly mortgage payments, lenders do not hesitate to offer 100% financing to borrowers without an upfront cost.

No PMI Required

Unlike conventional loans, your VA loan doesn’t require you to purchase Private Mortgage Insurance (PMI). You may need to pay a funding fee to get your loan but, that, too, isn’t a compulsion. You can request your lender to add the funding fee to the total loan amount, or if you are a Veteran compensated by the VA, a funding fee doesn’t apply to you.

Here are some of the exclusive benefits of VA home loans:

  • Little-to-no down payment
  • Available at lower interest rates
  • The borrower is not penalized by the lender in case of foreclosure.
  • Option to refinance a non-VA loan into a VA loan

Serving Veterans Since 1944

The VA loan program was brought into effect in 1944. In the early years of its establishment, VA loan benefits helped WWII Veterans restart a civilian life. Since then, more than 23 million VA home loans have been allotted to Veterans. Today, VA loans offer eligible borrowers cost-effective options for home financing or home loan refinancing.

VA Loan Rates

Your VA loan rates are calculated depending on various factors, like credit history, loan-to-income ratio, loan amount, and so on.

Monthly Mortgage Payment – 

Your monthly mortgage payment is calculated based on the following three factors:

  • Principal and Interest – Your principal and interest is the loan amount and the interest charged by the lender on that amount. Your loan term can affect your VA loan interest rate.
  • Property Taxes – Property taxes are calculated every year. The total tax amount is divided by 12 months to determine the exact amount you will be paying as part of your monthly mortgage payment.
  • Insurance – Your monthly mortgage payment may also include homeowner’s insurance, which is also paid annually.

Qualifying for a VA home loan may require an expert’s guidance. We recommend you reach out to a VA loan agent before applying for a VA home loan.  

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