For years, the VA loan has been the best mortgage option on the market for active military members and veterans. It is backed by the federal government and offers reduced interest rates. In fact, VA rates are so low that some people are skeptical of its validity, suspecting that the offer is “too good to be true.” However, by understanding and taking advantage of VA home loan rates, veteran buyers can save thousands of dollars. Find out how to get the most out of the VA loan that you earned!
Today’s VA Rates: What are the Benefits?
Since the VA loan is guaranteed by the Department of Veterans Affairs and is, therefore, protected against loss, mortgage lenders have the ability to make interest rates lower for applicants. Historically, the interest rate on a VA mortgage beats the market rates by 3/8 of a percentage point or more. Although this may not sound like a significant decrease, even an interest rate difference of 3/8 of a percent point can save a homebuyer thousands of dollars. VA loan rates also routinely beat the interest rates offered for FHA or conventional loans.
But that’s not all – besides consistently offering better rates than other types of home loans, today’s VA loan rates are now lower than they have been in years. Whether you compare these rates with other home loan types or with historical VA rates, today’s VA loan rates trump the competition on all accounts.
Type of VA Loan: Which One is Right for You?
With access to lower interest, it is even more important to choose a mortgage loan that fits your situation. There are three types of loans that are most frequently employed when buying a house: fixed-rate, adjustable-rate, and hybrid.
A fixed-rate mortgage is a home loan with an interest rate that remains the same throughout the life of the loan. The homebuyer must pay equal monthly payments until the loan is completely paid off. Fixed-rate home loans typically last for either 10 years, 15 years, 20 years, or (the most common choice) 30 years.
An adjustable-rate loan is a home mortgage loan with an interest rate that changes from year to year. However, the interest at the beginning of its term is usually lower than the rate for a fixed-rate’s term.
Hybrid loans have aspects of both the fixed-rate and adjustable-rate mortgages. Depending on which hybrid you go with, the loan is fixed for a period of 3 to 10 years, after which the interest rates begin to adjust, and payments are amortized based on the term’s balance. (More about the advantages here.)
Many homebuyers are drawn to the 30-year fixed rate, seeing it as the only option that provides long-term certainty. However, it is important to recognize that, because the home loan is perpetually at the same high interest rate, this mortgage loan typically will cost the homebuyer a lot of money over time. Since most of the payments with the 30-year fixed-rate loan go towards paying off interest instead of simply paying the principal, homebuyers spend thousands of dollars more than they would have spent using another kind of loan. Therefore, with the lower interest rates offered by the VA, it is often better to consider using an adjustable-rate loan or hybrid loan. And of course, even if you do lock into a great rate now, don’t forget the benefits of to refinancing when interest rates fall.
VA Loan Interest Rates: Where Can You Find the Lowest Rate?
When dealing with costs for purchasing and refinancing your home, the best option is to seek advice from your VA specialist. Interest rates fluctuate daily depending on the market, and part of a VA loan officer’s job is to watch the interest rate landscape and predict whether interest rates are rising or dropping. A VA loan specialist can advise you on whether or not refinancing your mortgage loan can save you money. Call a VA loan officer today and find out more about how you can save money with our low VA loan interest rates.