VA Loan Rates: What You Need to Know

If you’re a veteran or active member of the military, you may be eligible for a VA Loan. VA Loans offer a number of benefits, including low interest rates and no down payment.

In this blog post, we’ll cover everything you need to know about VA Loan rates. We’ll explain how VA Loan rates are determined and how they can change over time. We’ll also provide some tips on how to get the best VA Loan rate possible.

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Introduction

The VA loan program is one of the most benefits offered to veterans and active-duty military personnel. It allows eligible individuals to buy a home with little or no money down and often at lower interest rates than conventional mortgages.

However, like all mortgage products, the interest rate you pay on a VA loan is determined by many factors, including credit score, loan amount and Loan to Value Ratio (LTV). In this article, we’ll take a look at what you need to know about VA loan rates so that you can make the best decision for your needs.

Types of VA Loans

There are four main types of VA loans that borrowers can choose from:
-VA purchase loans
-VA cash-out refinance loans
-VA interest rate reduction refinance loans (IRRRLs)
-VA streamline refinance loans

Each of these loan types comes with its own set of benefits and drawbacks, so it’s important to compare them in order to choose the best one for your needs.

VA purchase loans are made by private lenders and guaranteed by the VA, so they may be a good option for borrowers who don’t have strong credit or who may not otherwise qualify for a conventional mortgage. These loans can be used to buy a home, build a home, make energy-efficient improvements to a home, or buy a manufactured home.

VA cash-out refinance loans are also made by private lenders and guaranteed by the VA, but they allow borrowers to take cash out of their home equity in addition to refinancing their mortgage. These loans can be used for any purpose, including debt consolidation, home improvements, or investing in other property. However, because they involve taking on more debt, they come with more risk than other types of VA loans.

VA interest rate reduction refinance loans (IRRRLs) are made by private lenders but are backed by the VA. They’re available to borrowers who already have a VA loan and want to lower their interest rate. These loans can be done with no appraisal and no income verification, which makes them easier to qualify for than other types of refinancing products. However, because they’re not backed by collateral like a conventional refinance loan, they do come with some additional risk.

Finally, VA streamline refinance loans are made by private lenders but are also backed by the VA. These loans are available to borrowers who already have a VA loan and want to lower their interest rate or monthly payment without having to go through the full underwriting process required for a conventional refinance loan. Streamline refinances can be done with no income verification and no appraisal, which makes them easier to qualify for than other types of refinancing products.

Loan Limits

The loan limit is the maximum amount the VA will guarantee without a down payment. The 2018 loan limits for one-unit properties are $453,100 in most counties across the country, with a few exceptions. In high-cost areas, the limit can be as high as $679,650. These loan limits vary by county and are recalculated every year based on median home values.

There are also limits on how much of the loan can be guaranteed by the VA. For loans up to $144,000, the VA will guarantee 25 percent of the loan. For loans between $144,000 and $417,000, the VA will guarantee 50 percent of the loan. For loans over $417,000, the VA will only guarantee 40 percent of the loan.

Funding Fee

The funding fee for second time users of the VA Loan program is 3.3 percent of the loan amount. The funding fee for first-time users is 2.15 percent of the loan amount. The funding fee decreases to 1.65 percent for those making a down payment of five percent or more. The funding fee is added to your loan balance and pays for the VA’s mortgage insurance program.

Mortgage Insurance

One of the benefits of a VA loan is that you don’t have to pay mortgage insurance. This can save you a lot of money every month.

Interest Rates

Interest rates for VA home loans are either fixed-rate or adjustable-rate. With a fixed-rate loan, your interest rate won’t change over the life of your loan. An adjustable-rate loan, on the other hand, may start off with a lower interest rate but could increase or decrease over time, depending on market conditions.

The VA doesn’t set interest rates for VA loans, but works with approved lenders to get you the best rate possible. That’s why it’s important to compare offers from multiple lenders before you choose one for your VA home loan. Be sure to ask each lender about their current VA loan rates and if they offer any discounts for certain borrowers, such as those who have served in the military or have a strong credit history.

Closing Costs

Although the VA loan process is simpler and usually quicker than a conventional loan, there are still costs associated with obtaining a VA loan.

Some of these costs may be paid by the seller, but in most cases the buyer will be responsible for at least some of the fees and closing costs.

The good news is that VA loans allow the buyer to finance all “acceptable” closing costs, which can make getting a VA loan even more affordable.

Below we’ve outlined some of the common closing costs associated with VA loans. Remember, your Loan Officer can help you understand which fees may be included in your loan.

*Loan Origination Fee:* This is a fee charged by the lender for processing the loan. This fee can sometimes be negotiated, especially if you have strong credit.
*Discount Points:* Discount points are prepaid interest that allows you to buy down your interest rate. One point equals 1% of your loan amount. For example, on a $200,000 loan, one point would equal $2,000.
*Appraisal Fee:* The appraiser will visit the property to determine its value and make sure it meets all minimum VA guidelines.
*Credit Report Fee:* The credit report fee covers the cost of pulling your credit report.
*VA Funding Fee:* The VA funding fee helps to offset the cost of the program and ensures its longevity. The amount varies depending on factors such as whether it’s your first time using the program, whether you serve in Active Duty or Reserves/National Guard, and whether you make a down payment (or paid upfront when you purchased your home).
For first-time users making a regular down payment, the funding fee is 2.15%. That percentage goes up slightly for those making smaller down payments, or for Reserve/National Guard members and subsequent users . It can also be rolled into your loan so you don’t have to pay it upfront out-of-pocket

Eligibility

To be eligible for a VA loan, you must be a current or former member of the U.S. armed forces, or the spouse of a service member who has died in the line of duty. You’ll also need to obtain a Certificate of Eligibility from the Department of Veterans Affairs to show that you meet the service requirements.

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