Military families have access to VA loans, one of the cheapest mortgage options in the country for homebuyers.
Benefits of VA loans include a $0 down payment, no PMI, and borrower-friendly credit requirements. Beyond that, VA loan rates are incredibly competitive, unlocking the home-owning potential for millions of military and veterans.
VA loan rates vary based on several factors, so read on to learn how to get the best rates when financing your home.
Best VA Loan Rates from Top Lenders
Rates change and one lender may offer you lower rates than another, but the following 10 companies consistently deliver competitive VA loans.
What Affects VA Loan Rates?
When you apply for your VA loan, lenders will consider the following to determine your rate.
Credit Score: Your credit score is the first factor a lender will look at to determine your VA loan rate. While the VA does not enforce a minimum credit score, some lenders do. Many lenders often require a credit score of 620 or better. The higher your score, the better the VA loan rate you qualify for. Loan Length: Whether you choose a 15- or 30-year mortgage will affect your monthly payments and interest rates, which we’ll discuss in depth below. The Market: The current housing market also determines your VA loan rate. As private lenders provide these loans, they set the rates, which change daily. Loan Type: Lenders often have different rates available for VA purchase, refinancing streamlining, or refinancing payout.
Mortgages with adjustable rate vs. fixed rate
When it comes to VA loans and other mortgage products, you can choose whether you want a fixed rate, a variable rate, or a hybrid variable rate.
Fixed Rate: As the name implies, this type of mortgage allows you to lock in an interest rate, which remains unchanged unless you refinance. Fixed interest rates can be higher than adjustable-rate mortgage rates, but they are typically the cheaper option over the life of a 30-year mortgage. Adjustable-rate mortgage: An adjustable-rate mortgage, or ARM, is a bit riskier, as rates change with the market. ARMs typically have better initial interest rates and access to lower rates when the market improves. However, market volatility means that your rate may also rise. Fortunately, VA ARMs come with government protection that limits increases to 1% at a time, with a maximum increase of 5% over the length of the loan. Hybrid floating rate: A hybrid ARM offers you a fixed interest rate for a specific time, say five years. After that, the mortgage interest is adjustable. This type of mortgage gives you the opportunity to insure lower VA loans with the temporary security of a fixed rate mortgage.
How to Qualify for the Best VA Loan Rates
With a good idea of what factors determine your VA loan rates, you may need to do some work on your finances before applying for a mortgage.
Determining your VA loan is just step one in getting a VA home loan. Once you qualify, you will need to find a lender who will approve your application.
While a decent credit score may be enough to get you a VA loan, an excellent score will get you better rates. If you plan on getting a VA loan or any other type of mortgage, start working to build a solid credit score.
Here are some surefire steps you can take to get your finances on track for mortgage approval and competitive VA loans:
Track your credit score: A free service like Credit Karma can help. You can access your credit score and resources on this site to improve your creditworthiness, and you will receive notifications about changes to your report. While these free scores give you a good idea of your creditworthiness, they don’t necessarily reflect what lenders see, as each of the major credit bureaus has its own method of calculating credit scores. Increase your score: Fix any issues you encounter on your report, make your payments on time, and use credit wisely to see improvements to your score. The effort you put into increasing your credit score — and the resulting lower interest rate — can save you hundreds, if not thousands, of dollars over the length of your mortgage. Pay off debt: The less debt you have, the less it will weigh, lower your monthly expenses and affect your debt-to-income ratio (DTI). Aggressively dealing with your debts and paying outstanding bills can dramatically improve your finances. It also frees up more of your future income to pay off your mortgage faster. Pay attention to the market trends: VA loans are generally lower than comparable conventional mortgages, but they mostly follow the same trends. Monitor the housing market to see if rates are particularly high or low when you shop for your VA loan.
How much can you save with a good interest rate?
It may not seem like much, but even a half percent difference in the interest rate on your VA loan can go a long way over a 30-year mortgage term.
For example, if you borrow $250,000 for 30 years and have an interest rate of 4.50%, you will pay a total of $206,016.78 in interest at the end of your loan term. If your rate is 5%, you will pay $233,139.46 in total interest.
That half-percent increase translates to an additional $27,122.68 over the course of your 30-year loan. In addition, your monthly payments will be higher – $1,342.05 per month instead of $1,266.71 per month with the lower interest rate of 4.5%. That’s a $75.34 difference in your monthly cash flow.
These differences become much greater when you can shave 1% or more off your interest rates.
Scroll down to see our VA loan interest comparison tables for 15- and 30-year VA loans.
15 Years vs. 30 Years VA Loan Rates
In addition to the type of VA loan you choose, the length of your mortgage will affect your rates.
Just as there are pros and cons to fixed-rate and adjustable-rate mortgages, both 15- and 30-year terms come with costs and benefits. The key is to decide which benefits best suit your needs.
If you opt for a mortgage with a 15-year term, you can expect a lower interest rate, but the term of your mortgage is half that of a 30-year mortgage, which means that your monthly payments are higher.
But you also get more equity in your home in a shorter amount of time, which can be a beneficial long-term financial strategy. But it can skyrocket your debt-to-income (DTI) ratio.
Conversely, a 30-year mortgage comes with lower monthly payments and higher interest rates, which can cost you dozens
of thousands of dollars.
To select the ideal mortgage length, look at your financial goals, income and needs, weighing the short-term and long-term implications of each type of mortgage.
Assumptions About VA Loan Interest Rates
$250,000 purchase price15-year and 30-year mortgage No down payment; no PMI Property Tax $2,400/year ($200/month) Homeowners Insurance $1,200/year ($100/month) No Fees Owners Association (VVV)
Compare 15-Year Mortgage Interest Rates
Compare 15-Year Mortgage Interest Rates
($250,000 loan; no down payment)3.50%4.00%4.50%5.00% Monthly Mortgage Payment$1,787.21$1,849.22$2,215.48$1,976.98 PMI (not required with VA loan)$0.00$0.00$0.00 $0.00 Property Tax (per month)$200.00$200.00$200.00$200.00 Homeowners Insurance (per month) $100.00 $100.00 $100.00 $100.00 Total Monthly Payment $2,087.21 $2,149.22 $2,212.48 $ 2,276.98 Total Annual Payment Amount $25,046.48 $25,790.64 $26,549.80 $27,323.81 Total Interest Paid (Term of Loan) $71,697.14 $82,859.57 $94,246.98 $94,246.98 $105,246.98 .
Compare 30-year mortgage interest
Compare 30-year mortgage interest
($250,000 loan; no down payment) 3.50% 4.00% 4.50% 5.00% Monthly Mortgage Payment $1,122.61 $1,194.54 $1,266.71 $1,342.05 PMI (not required with VA loan ) $0.00 $0.00 $0.00 $0.00 Property Taxes (per month) $200.00 $200.00 $200.00 $200.00 Homeowners Insurance (per month) $100.00 $100 .00 $100.00 $100.00 Total Monthly Payment $1,422.61 $1,494.54 $1,566.71 $1,642.05 Total Annual Payment Amount $17,071.34 $17,922.46 $18,800.56 $19,704.65 Total Paid interest (term of loan) $154,140.22 $179,673.77 $206,016,512,41456,0169,139,746,41456,0169,139,746,4140 $2233,016512.46 $18,800.56 $19,704.65
If you are taking advantage of the VA home loan program, make sure you do what it takes to improve your credit score ahead of time so that you qualify for the best interest rate.
Equal housing options. The Department of Veterans Affairs affirmatively administers the VA Home Loan Program by ensuring that all veterans have an equal opportunity to purchase homes with VA assistance. Federal law requires all participants in the VA Home Loan Program—builders, brokers, and lenders who list homes for sale with VA financing—to adhere to Fair Housing Laws and not discriminate based on race, color, religion, gender , disability, family status, or national origin of the Veteran.
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