09 Jan The 5 best ways to get VA Mortgage Rate
Veterans Affairs loans are insured by the VA and available to most veterans, service members, reservists, National Guard members, and surviving spouses. VA loan rates are usually lower than conventional ones, but they can still vary by lender and your financial situation.
To get the best VA mortgage rate, follow these five tips.
- Before applying for a VA loan, work on improving your credit score.
Your credit score heavily influences VA mortgage rates. Getting a VA loan with less-than-perfect credit is possible, but rates tend to drop as your credit score rises.
Check your credit report and three-digit credit score before talking to lenders. You may need correct information, maxed-out credit cards, and overdue bills. You can resolve these credit problems, and you will get a better rate if you are patient and diligent.
- Compare at least three VA mortgage lenders.
The cost of a VA loan varies from lender to lender due to differences in VA rates, fees, and services. Avoid paying too much by comparing quotes from three lenders, at least.
Look for the interest and the annual percentage rates, or APR, when a lender provides a loan estimate. In contrast, APR represents the total price you’ll pay annually – interest plus fees – for borrowing the lender’s money. There is typically a difference between your interest rate and the APR of 0.20% to 0.25%. Make sure you ask about fees when comparing APRs.
Consider closing costs, lender fees, appraisal, credit check, and flood certification fees when comparing fees. Some lenders waive these fees or charge less than others.
VA loan funding fees range anywhere between 1.25 and 3.3%, depending on your military service, down payment, and previous VA loans. In particular, if the VA funding fee is paid upfront rather than rolled into your mortgage, you will pay a higher interest rate.
- Ask about state loan programs for veterans.
VA loans are available throughout the country, but your state may also offer military-focused loans. Other benefits, such as rate discounts and down payment assistance, may be available if you meet eligibility requirements. Maryland’s Homefront mortgage offers veterans a 0.25 percentage point interest rate discount, and Ohio Housing Finance Agency provides a similar value. Make sure you ask potential lenders if they participate in state loan programs when comparing VA loan rates.
- Investing in points (or making a down payment) is a good idea.
A VA loan can be obtained without a down payment, but if you can afford at least 5%, you could save thousands over the life of the loan. A VA loan can also be lowered by purchasing discount points. You pay a lump sum upfront when you buy points in exchange for a lower rate. Points may cost more initially, but they could save you money in the long run. Buy points only if you can afford them over the long term; otherwise, you’ll end up paying for long-term savings that don’t materialize.
- Choose the right loan for your needs.
There are many VA loans, including purchase, refinance, and mortgages for Native Americans and veterans with disabilities. The interest rate on shorter loans is generally lower, but the monthly payment is higher. Consider a more temporary loan if you expect to live there for the entire term and have a stable income. VA loans rates could rise over time and change the monthly payment on adjustable-rate mortgages, or ARMs. If you are likely to refinance or move before the introductory rate expires, an ARM may be right for you.