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How To Find The Best VA Mortgage Rates
Interest rates for all types of mortgage loans are always changing. You may see them go up or down on any given day. Major rate hikes or drops can usually be somewhat predictable when the Federal Reserve announces significant adjustments to the Fed rate. It is one factor that ultimately drives mortgage rates, along with the U.S. Treasury bond yield and other economic indicators. Locking in the best interest rate for your home loan is all about good timing and financial preparation.
How Are VA Mortgage Rates Determined?
VA mortgage rates are driven by the same factors. However, these home loans are backed by the U.S. Department of Veterans Affairs and traditionally offer lower interest rates compared to conventional mortgage loans. The primary catch is that the borrower must have a clear military affiliation. VA loans are only available to active military service members, veterans and surviving spouses.
Certain economic indicators will determine average VA mortgage rates. However, the interest rate you qualify for will also be affected by your financial standing. Those with a steady job, healthy income, excellent credit score and low debt-to-income ratio (DTI) will be able to get a much lower mortgage rate than those in less-ideal financial situations. We’ll review some of the qualification standards later on in this article.
Locking in the Best VA Mortgage Rate
Timing is also very important to getting the best possible VA mortgage rate for your home loan. You will want to work with your VA-approved lender to have all your documentation ready. They will be able to pre-approve you for your VA loan and lock in a good rate for you. An experienced lender will know how to time it right.
The great news for VA loan borrowers is that VA mortgage rates are lower, on average, compared to conventional mortgage loans. The numbers may vary, but generally they can be as much as 0.25% lower.
VA Loan Qualification Standards
To get pre-approved for your VA mortgage loan, you will need to be financially prepared. This means there are key steps you should be taking before even applying for your loan. Work to get your finances in order. This will mean improving your FICO score, paying down existing debts and making sure your employment/income situation is strong. If you are an active military service member or honorably discharged veteran receiving disability payments, you should be in fairly good shape when it comes to the employment/income verification.
The VA will issue you a Certificate of Eligibility (COE) if your length and type of service meets their specific guidelines. You can apply for your Certificate directly through the VA or through a VA-approved mortgage lender. Here are the other requirements you can expect to qualify for a VA loan:
FICO Score—You’ll need a credit rating of at least 620 for a VA home loan.
Debt-to-Income Ratio (DTI)—Your DTI shouldn’t more than 60%, meaning your total monthly debt payments cannot exceed 60% of your monthly pre-tax income.
Closing Costs—The VA will charge a funding fee for a VA loan. There are some exceptions where you may not have to pay this fee. Examples include qualifying surviving spouses and disability/Purple Heart recipients. If you don’t have the money to pay this fee upfront, your lender may be able to roll it into the loan principal.
Down Payment—One huge advantage of VA loans is that you can get 100% funding for your home purchase. This means no down payment is required. You should aim to put down money if you can afford it, though. A higher down payment can reduce your mortgage rate and minimize mortgage insurance (PMI) payments that will be required until 20% of the loan value is paid off.
It is important to know that the better your financial standing, the lower VA mortgage rate you will likely be able to receive. A VA borrower with a high FICO score, low DTI, healthy down payment and strong income/employment history will definitely qualify for a lower interest rate. This is why it’s good to focus on your finances before getting pre-approved for your VA loan. The pre-approval process will also let you know what you can afford and will make your home purchase offers look much more attractive to sellers.
To learn more about VA loans, and to get pre-approved and lock in a great VA mortgage rate, contact Moreira Team | MortgageRight today. We are a VA-approved lender and our experienced lending team will be glad to guide you through the process of buying a home.