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A mortgage backed by the Department of Veterans Affairs, called a VA loan, is a mortgage option for current or former members of the armed forces.
VA loans typically have little or no down payment requirements and lower interest rates than traditional mortgage products. They also tend to be more flexible, allowing for a higher debt-to-income (DTI) ratio and lower credit scores, and don’t require private mortgage insurance (PMI).
What are today’s VA mortgage rates?
Today’s rate on a 30-year fixed VA loan is 5.15% compared to the previous week’s rate of 4.96%.
The 52-week high for a VA fixed mortgage rate was 5.15% and the 52-week low was 3.42%.
Overview of VA tariffs
Mortgage rates across the board are expected to rise through 2022, as are VA mortgage rates.
Lawrence Yun, chief economist for the National Association of Realtors (NAR), warns that borrowers should be prepared to “endure some increases in mortgage rates” this year, although he expects rates to remain below 4% in by the end of 2022.
Mortgage giant Freddie Mac predicts rates will average 3.5% in 2022 and 3.9% in 2023. Meanwhile, the American Bankers Association sees the 30-year fixed rate mortgage reaching an average 3.5% this year and 3.9% in 2023.
What is a VA loan?
VA home loans are provided by private lenders such as banks, credit unions, and mortgage companies. The VA guarantees part of the loan, which means they are liable for a percentage of the amount borrowed in the event of default. This safety net encourages the lender to offer you more favorable loan terms.
This loan product comes with low or no down payment options and no monthly PMI requirement. Most lenders offer VA loans with terms of 10, 15, 20, 25, or 30 years, with fixed or adjustable rates.
How do I qualify for a VA loan?
You must be a veteran, active duty member, National Guard member, reserve, or surviving spouse of a veteran to qualify for a VA loan. A Certificate of Eligibility (COE) from the VA is required. You can apply for your COE online or by mail, or your lender can get it for you.
You can view the full list of eligibility here.
How much does a VA loan cost?
The VA loan includes a finance charge, put in place by Congress to ensure that there is enough money in the program to cover its loan commitments and ensure loan terms are always affordable.
Your lender will also charge other closing costs. Many lenders charge a flat loan origination fee of 1%, plus additional fees. This should be on your checklist when shopping around for what loan costs can be added to your overall amount.
VA Loan Funding Fee
Finance charges are a percentage of your total loan amount. This varies depending on whether this is your first time using the perk, how many times you’ve used the perk, and your deposit amount. Finance charges generally range between 1.4% and 3.6% for purchase loans.
You can pay financing fees by including them in your overall mortgage (also called financing) and paying them off over time, or you can choose to pay the full fees at closing.
If you used a VA loan to purchase a manufactured home, you only need to pay the first-time financing fee.
When to Consider a VA Loan
While there’s no prohibition on using a VA loan more than once, you won’t get the same benefits as a first-time home buyer, especially if you plan to keep your old home backed by GO.
Advantages and disadvantages of a VA loan
Who Sets VA Loan Rates
The Department of Veterans Affairs does not set mortgage rates. Your lender will determine the rate for your VA loan based on market rates, your credit profile, and your financial situation. You may qualify for a lower interest rate if you choose to make a down payment.
How to Find the Best VA Loan Rate
There are many companies online that rank lenders offering VA loans, nationally and in your area, and provide daily interest rate information. Alternatively, you can work with a mortgage broker who specializes in helping veterans and active duty military.
You should get a loan estimate from several lenders and compare loan offers using the guide from the Consumer Financial Protection Bureau (CFPB).
VA Purchase Rates vs. VA Refinance Rates
VA loan purchase rates refer to the interest on a loan to buy a home, while a VA refinance rate will be your new interest rate after you refinance your mortgage.
VA Loan vs 30 Year Fixed Mortgage
A VA loan is only available to veterans, active duty military, reserves, or the National Guard. A 30-year fixed mortgage, commonly known as a conventional mortgage, is available to everyone. It comes with a different interest rate, requires a down payment, and may also require a PMI depending on the amount you have invested.
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Frequently Asked Questions (FAQ)
Are VA rates lower than conventional rates?
Although it is commonly believed that VA loans have lower interest rates than conventional loans, this is not necessarily true. Financial institutions that cater to veterans and active duty personnel may offer lower interest rates than conventional loans. It is therefore important to know who you have chosen as your lender and to shop around from the start.
How many times can I use a VA loan?
You can use the benefits of your VA loan more than once in your lifetime.
Can I buy land with a VA loan?
You cannot use a VA loan to buy land alone, even if you intend to build a house later. You must build a house at the same time to be eligible.
Can I use a VA loan to build a house?
Yes, you can use it to build a house.
Do VA loans require mortgage insurance?
You don’t need private mortgage insurance and you don’t have to pay mortgage insurance premiums.
Is there a penalty for prepaying a VA loan?
There are no penalty charges for prepayment of the loan.
How long do you have to live in a house with a VA loan?
A VA loan can only be used to finance the purchase of a home that will be your primary residence. The VA has an occupancy requirement requiring you to move in within 60 days of closing. You cannot use the property as a seasonal vacation home.