One of the biggest financial advantages available to active duty service members, veterans, and surviving spouses is the VA home loan program. VA mortgages have competitive terms, like no down payment, no private mortgage insurance (PMI), and flexible credit guidelines, as well as competitive interest rates.
Still, not all VA mortgage rates are the same. Rates vary from lender to lender, and your financial situation can play a major role in the terms you’re offered. The difference between a good rate and a great rate can translate into tens of thousands of dollars saved over the life of your loan.
If you're preparing to buy a home or refinance with a VA loan, here are five tips that can help you secure the best possible interest rate.
See What You Qualify For With a VA Loan
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1. Strengthen Your Credit Score Before Applying
Although VA loans are known for their flexible credit requirements, your credit score will still determine your mortgage interest rate. Borrowers with higher scores are rewarded with the lowest rates. Over 30 years, even a small difference in rates can lead to significant savings.
Some VA lenders will approve borrowers with credit scores as low as 580, but a score of 700 or higher often puts you in a better position to secure the best interest rate. Before you apply for a VA mortgage, boosting your credit score can go a long way.
Here are some ways you can improve your credit score:
- Pay down revolving debt to lower your credit utilization
- Make on-time payments, especially in the six to 12 months before applying
- Avoid opening new credit accounts, which trigger hard inquiries
- Dispute any errors on your credit report
- Keep old credit lines open to maintain a long credit history
2. Compare Multiple VA Lenders
Many borrowers mistakenly assume that VA mortgage rates are the same everywhere since the VA backs the loans. However, the VA doesn’t set interest rates—individual lenders do. Because of this, VA mortgage interest rates can vary widely from one lender to another, sometimes as much as 0.50% or more.
Comparing multiple VA lenders can help you find the lowest interest rate for your individual situation. You might find that one lender can offer you significantly lower rates than others. That difference can cost or save you thousands over the life of the loan.
Below are a few tips for comparing VA mortgage lenders effectively:
- Get quotes from at least three VA-approved lenders
- Compare both the interest rate and the APR (which includes fees)
- Ask lenders about current discount points, lender credits, and rate locks
- Use the same loan type (fixed vs. ARM, 15-year vs. 30-year) when comparing
3. Consider Buying Discount Points to Lower Your Rate
VA borrowers have the option to pay discount points, which are upfront fees that permanently reduce the mortgage interest rate. One discount point typically costs 1% of the loan amount and may lower your rate by about 0.25%, although it can vary.
Buying points can dramatically reduce your monthly payment and total interest costs, especially if you plan to stay in the home long-term. While buying discount points isn’t the right option for everyone, it can make sense if:
- You plan to stay in the home for more than five years
- The break-even point (cost vs. savings) is reasonable
- The seller is contributing toward closing costs, and you want to use those funds to lower your rate
In general, buying discount points isn’t a great option if:
- You expect to refinance soon
- You’re only planning to stay in the home short-term
- You need cash for other expenses or emergencies
4. Improve Your Debt-to-Income Ratio
Lenders use your debt-to-income (DTI) ratio to evaluate your ability to manage monthly mortgage payments. Although the VA doesn’t set a strict DTI limit, lenders usually prefer a DTI ratio of 41% or lower. A lower DTI can improve your loan terms and your interest rate because it proves to the lender that you’re financially responsible.
Even a small improvement in your DTI can make a big difference in the loan terms you receive. If you’re wondering how to improve your DTI before applying for a VA loan, here are some tips:
- Pay off high-interest debt (credit cards or personal loans)
- Avoid taking on new debt before applying
- Increase your income if possible
- Refinance or consolidate debt to reduce monthly payments
- Add a co-borrower with stable income and low debt
See What You Qualify For With a VA Loan
Check VA Eligibility
5. Choose the Right Loan Type and Term
The type of VA loan you choose will impact your mortgage interest rate, so choosing the right loan type and term can help you get the most favorable interest rate. Here are the two main types of mortgages:
- Fixed-rate mortgages: These loans have a fixed interest rate over the life of the loan. Your monthly payments never change.
- Adjustable rate mortgages (ARMs): ARMs can start with lower interest rates initially, but may increase over time. That means your monthly payment can change.
If you plan to stay in the home for just a few years, an ARM might offer a lower starting rate than a fixed loan. But if long-term stability is your priority, a fixed-rate VA loan is typically the best choice.
Another thing to consider is the loan term, or repayment period. Most VA loans are 30-year mortgages, which offer lower payments but higher overall interest costs. If you choose a 15-year VA loan, it usually has lower interest rates but higher monthly payments.
To lock in the lowest interest rate possible, you should pick the loan structure that best aligns with both your budget and your long-term financial plans.
Final Thoughts
VA loans can offer some of the most competitive mortgage interest rates. However, a low interest rate isn’t guaranteed, so it’s important to prepare and choose the right lender. Whether you're purchasing a home or refinancing an existing VA loan, the steps you take before applying can dramatically influence the rate you're offered and ultimately, how much the loan costs.
Some of the best ways to lock in a low VA mortgage interest rate include improving your credit score, buying discount points, lowering your DTI ratio, and choosing the right loan type and term for your goals. You should also compare multiple lenders to see which one can offer you the lowest interest rate for your situation.
Frequently asked questions
What affects VA mortgage interest rates?
VA mortgage interest rates are influenced by both market conditions and your personal financial profile. While overall rates move based on factors like inflation and economic trends, lenders also evaluate borrower-specific details when setting your rate.
Common factors that affect VA mortgage interest rates include your credit score, debt-to-income ratio, loan amount, loan term, and whether you choose a fixed or adjustable-rate mortgage. The lender you choose can also play a role, since each lender sets its own pricing. Improving your financial profile and comparing lenders can help you secure a lower rate.
Are VA loan interest rates the same for everyone?
No, VA loan interest rates are not the same for everyone.
Although VA loans are backed by the government, interest rates are determined by individual lenders and vary based on the borrower’s financial situation. Two borrowers applying for the same type of VA loan may receive different rates depending on factors like credit score, debt levels, and loan structure.
Because rates are personalized, taking steps to improve your credit, reduce debt, and compare offers can help you qualify for a better VA mortgage rate.
Do VA mortgage rates vary by lender?
Yes, VA mortgage rates can vary significantly by lender.
The Department of Veterans Affairs does not set VA loan interest rates, lenders do. As a result, rates, fees, and overall loan costs can differ from one VA-approved lender to another.
Shopping around and comparing multiple VA lenders can reveal meaningful differences in interest rates, sometimes saving borrowers thousands of dollars over the life of the loan. It’s important to compare both the interest rate and the annual percentage rate (APR) when evaluating offers.
What credit score is needed for the best VA loan rate?
There is no official minimum credit score required by the VA, but higher credit scores generally qualify for better interest rates. While some VA lenders approve borrowers with scores as low as 580, borrowers with scores of 700 or higher are typically offered the most competitive VA mortgage rates.
If you’re planning to apply for a VA loan, improving your credit score before applying can help you secure a lower interest rate and better overall loan terms.
Can buying discount points lower my VA loan interest rate?
Yes, buying discount points can lower your VA loan interest rate.
Discount points are upfront fees paid at closing that permanently reduce your mortgage rate. Typically, one point costs about 1% of the loan amount and may lower your interest rate by roughly 0.25%, though the exact impact varies by lender.
Buying points can be a smart option if you plan to stay in the home long-term and want to reduce your monthly payment and total interest costs. However, it may not make sense if you plan to refinance or sell the home in the near future.
Is it better to lock in a VA mortgage rate?
Locking in a VA mortgage rate can be a smart move if rates are rising or if you want payment certainty. A rate lock protects you from interest rate increases during the loan processing period, typically for 30 to 60 days.
If rates are stable or declining, some borrowers choose to wait before locking. However, market conditions can change quickly, so many VA borrowers prefer to lock in their rate once they’re comfortable with the terms. Your lender can help you decide when to lock based on current market trends and your timeline.
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