VA loans are one of the most valuable home financing tools available to eligible military service members, veterans, and surviving spouses. These loans are backed by the U.S. Department of Veterans Affairs (VA), and often come with lower interest rates, no down payment requirements, and more flexible credit standards than other mortgage options.
VA loan rates fluctuate with the broader mortgage market, and vary based on other factors, like your credit score, lender, and loan term. Here’s a closer look at VA loan rates today and how you can get the lowest VA mortgage interest rate for your situation.
What are VA Loan Rates Today?
VA home loan rates change daily depending on market conditions like inflation and investor demand for mortgage-backed securities. In the table below, you can see VA loan rates today.
What Factors Influence VA Home Loan Rates?
Many different factors affect VA mortgage interest rates. Some of the most important factors that can influence current VA home loan rates include:
- Economic conditions: Inflation, employment, and Federal Reserve decisions all affect VA mortgage rates. When inflation rises or the Fed signals tighter monetary policy, VA mortgage rates usually increase.
- Bond market trends: Mortgage rates closely follow the yield on U.S. Treasury bonds, especially the 10-year Treasury. When bond yields rise, mortgage rates typically go up.
- Credit score: The VA doesn’t set a minimum credit score for VA loans, but lenders do. Borrowers with higher credit scores, stable income, and lower debt-to-income (DTI) ratios usually qualify for the best rates.
- Loan term and structure: Shorter loan terms, such as 15-year VA loans, generally have lower interest rates than 30-year loans. Adjustable-rate VA loans may start with lower rates initially, but can increase later on.
- Lender: VA mortgage rates vary from lender to lender. To find the most competitive interest rate, it’s a good idea to compare VA loan rates from multiple lenders.
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How to Get the Best VA Home Loan Rates
While VA home loan rates are often more competitive than conventional mortgage rates, a low interest rate isn’t guaranteed. You can use these tips to get the best VA home loan rate:
- Compare lenders: VA loan rates are different for everyone. Comparing several lenders can help you find the lowest interest rate for your financial situation.
- Improve your credit: Boosting your credit score by paying down debt, making on-time payments, and keeping your credit utilization low can potentially reduce your rate.
- Lower your DTI ratio: VA mortgage lenders usually favor borrowers with a low DTI ratio, which can lead to better interest rates.
- Put some money down: Although VA loans don’t require a down payment, putting some money down can often help you get a more competitive mortgage interest rate.
- Consider discount points: Some lenders allow VA borrowers to pay for discount points upfront in exchange for a lower interest rate. However, this is usually only recommended if you plan to stay in the home long-term.
VA Loans vs. Conventional Loan Rates
VA loans typically have lower interest rates than conventional mortgages because they’re backed by the VA. If a borrower defaults on their mortgage, the VA guarantees a portion of the loan. That safety net protects lenders from financial loss, and allows them to offer lower interest rates than they typically would on a conventional mortgage.
Additionally, VA loan borrowers aren’t required to pay private mortgage insurance (PMI), which is usually a requirement on conventional mortgages with a down payment of less than 20%. Because VA loans don’t require PMI, even with zero money down, there’s less risk for the lender, and the overall cost of the loan is lower.
However, VA loan rates aren’t always lower than conventional loan rates. Mortgage rates fluctuate based on market and economic conditions, and depend on the individual borrower. If you’re thinking about buying a home using a VA loan, it’s still worth comparing VA loans vs. conventional loans to see which loan type will have the lowest costs.
VA Loan Refinance Rates
VA borrowers have two main refinancing options—the cash-out refinance and the VA Interest Rate Reduction Refinance Loan (IRRRL), also known as a VA streamline refinance. Like VA purchase loans, VA IRRRL rates vary by lender, loan type, and borrower profile.
The table below shows the current VA loan refinance rates:
Refinancing involves replacing an existing mortgage with a new VA-backed loan, usually to lower your interest rate, reduce monthly payments, change loan terms, or access home equity.
Here are the primary differences between the VA cash-out refinance loan and the VA IRRRL:
- VA cash-out refinance: The VA cash-out refinance loan enables eligible borrowers to replace their existing mortgage (VA or conventional) with a new VA-backed loan and take cash out from their home equity at closing. The money can be used for any purpose, but is often used to pay for home renovations, emergency expenses, school tuition, medical bills, or investing in another property.
- VA IRRRL: The VA IRRRL loan is designed to lower a borrower’s interest rate or monthly payment, or move from an adjustable-rate mortgage (ARM) to a fixed-rate loan. It’s only available to homeowners who already have a VA mortgage. Because IRRRLs are considered lower risk, they typically require less documentation, like appraisals and income verification.
How VA Loan Rates Compare to Other Mortgage Rates
VA loans often have more favorable interest rates than other types of mortgages, even though low rates aren’t guaranteed. Here’s how VA loan rates stack up against other mortgage types:
- VA loans vs. conventional loans: VA loan rates are usually lower than conventional mortgage rates, especially for borrowers who aren’t making a large down payment.
- VA loans vs. FHA loans: VA loans often have similar or lower interest rates than FHA loans. Plus, VA loans don’t require PMI, which FHA loans do.
- VA loans vs. USDA loans: Both VA and USDA loans offer low rates and zero-down financing, but VA loans tend to be more flexible for eligible military borrowers.
While VA loan rates can be competitive, it’s important to remember that VA loans don’t always have the lowest rates. Some borrowers might find that an FHA or USDA loan could have lower costs than a VA loan. This is why comparing loan options and lenders is important when getting a mortgage.
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Frequently asked questions
Do VA Loans Have Lower Interest Rates?
Yes, VA loans typically have lower interest rates than conventional mortgages. This is largely because the VA guarantees a portion of the loan, which reduces risk for lenders and allows them to offer more favorable rates.
Who Has the Best VA Home Loan Rates?
There’s no single lender that always offers the best VA loan rates. Mortgage rates vary based on factors like market conditions and the borrower’s financial profile. To find the best VA home loan rate, you should compare multiple VA-approved lenders and review the rates and fees.
What is the 1% Rule on a VA Loan?
The 1% rule on VA loans says that VA lenders are required to cap origination fees at 1% of the total loan amount. It applies to fees like processing and underwriting costs, but not third-party fees, like appraisal fees and title insurance, or the VA Funding Fee. The 1% rule helps protect borrowers from excessive upfront costs.
Who Sets VA Loan Rates?
VA loan rates are determined by private lenders, and influenced by market conditions, borrower qualifications, and overall economic trends. Although VA loans are backed by the U.S. Department of Veterans Affairs, the VA doesn’t have any role in setting VA loan rates.
What Disqualifies You From a VA Loan?
You could be disqualified from a VA loan if you don’t meet the VA service eligibility requirements, or if a lender determines that you don’t meet their credit, income, or DTI criteria. Additionally, you might be ineligible for a VA loan if the home you’re purchasing doesn’t meet the VA’s Minimum Property Requirements (MPRs).
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