What Are Today’s VA Mortgage Rates?
On Monday, September 27, 2021 according to Bankrate’s latest survey of the nation’s largest mortgage lenders, the average 30-year VA mortgage rate is 2.670% with an APR of 2.860%. The average 30-year VA mortgage refinance rate is 2.710% with an APR of 2.930%.
Current VA Mortgage Rates
|30-Year Fixed Rate||3.010%||3.160%|
|30-Year FHA Rate||2.630%||3.520%|
|30-Year VA Rate||2.710%||2.930%|
|30-Year Fixed Jumbo Rate||3.020%||3.090%|
|20-Year Fixed Rate||2.870%||3.020%|
|15-Year Fixed Rate||2.290%||2.500%|
|15-Year Fixed Jumbo Rate||2.290%||2.350%|
|10-Year Fixed Rate||2.250%||2.440%|
|5/1 ARM Rate||2.700%||3.990%|
|5/1 ARM Jumbo Rate||2.690%||3.700%|
|7/1 ARM Rate||3.530%||3.740%|
|7/1 ARM Jumbo Rate||3.850%||3.620%|
|10/1 ARM Rate||3.850%||3.900%|
|30-Year Fixed Rate||3.040%||3.240%|
|30-Year FHA Rate||2.590%||3.470%|
|30-Year VA Rate||2.670%||2.860%|
|30-Year Fixed Jumbo Rate||3.050%||3.160%|
|20-Year Fixed Rate||2.890%||3.070%|
|15-Year Fixed Rate||2.300%||2.580%|
|15-Year Fixed Jumbo Rate||2.300%||2.380%|
|10-Year Fixed Rate||2.290%||2.510%|
|5/1 ARM Rate||2.790%||3.920%|
|5/1 ARM Jumbo Rate||2.910%||3.610%|
|7/1 ARM Rate||3.020%||3.740%|
|7/1 ARM Jumbo Rate||3.280%||3.570%|
|10/1 ARM Rate||3.260%||3.920%|
Rates as of Monday, September 27, 2021
What Is a VA Loan?
A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs. A VA loan has several advantages over other types of mortgages, including competitive interest rates, no private mortgage insurance (PMI) requirement, and the option for financing a home with no down payment.
VA purchase loans are only available to borrowers with qualifying military service who are purchasing a primary residence. In addition to purchase loans, there are also VA-backed loans for refinancing your existing mortgage and direct VA loans for Native American Veterans.
Who Qualifies for a VA Loan?
The main requirement to qualify for a VA loan is military service or you must be a surviving spouse of a veteran. The amount of time you need to serve in the military to qualify varies depending on when you served. But, if you’re on active duty, you only need 90 continuous days before you’re eligible for a VA loan.
Like other government-secured loans, a VA mortgage is typically easier to qualify for than a conventional loan. While each lender has specific credit score requirements, the VA doesn’t have an official minimum credit score requirement. If you have a blemish on your credit report, like a foreclosure or bankruptcy, a VA loan can be easier to qualify for. You may be eligible for a new VA mortgage in as little as one or two years after a bankruptcy, depending on the type of bankruptcy. With a conventional mortgage, the waiting period is at least twice as long.
How Do I Compare VA Loans and Other Mortgage Rates?
There are a few key differences between VA loans and other mortgages. Unlike most mortgages, VA loans don’t require private mortgage insurance even if the borrower has less than 20% equity in the property. PMI can cost anywhere from 0.5% to over 2% annually, so avoiding PMI can be a significant savings.
VA loans also have no minimum down payment requirement, so you can finance 100% of the home purchase. The minimum down payment for an Federal Housing Administration (FHA) loan is 3.5% and for conventional mortgages it can be as little as 3%, although it can be much higher.
However, in lieu of PMI or a down payment, VA loans have an upfront funding fee which is typically 1.4%-3.6% of the loan amount. The VA mortgage funding fee can be rolled into your loan and wounded or disabled service members may qualify for a funding fee waiver.
VA Loan vs. 30-Year Fixed Mortgage
Compared to a conventional 30-year fixed mortgage, a 30-year VA loan has some distinct advantages and disadvantages.
Aside from what we already covered (no down payment, no PMI, etc.) a VA loan is typically easier to qualify for than a conventional loan, assuming you meet the military service requirements. So a borrower with a weaker credit history may have a better chance of qualifying for a VA loan or getting a better mortgage rate.
However, VA loans have limitations. They can’t be used for second homes or investment properties. Not only that, but the upfront funding fee increases each time a veteran takes advantage of the VA mortgage benefit. For example, if your down payment is less than 5%, the funding fee jumps from 2.3% to 3.6% after the first use of your VA loan benefit.
VA Purchase Rates Versus VA Refinance Rates
Typically, VA purchase rates will be lower than VA refinancing rates. However, there are a few factors that play into what rate you can qualify for.
The main things to pay attention to are your credit score and loan-to-value ratio (LTV). But the type of mortgage is also important. You can take equity out of your home with a VA cash-out refinance, but cash-out refinance loans often have higher interest rates than standard rate-and-term refinancing.
The length of your repayment term will also move your rate in one direction or another. Longer-term loans have higher rates and shorter-term loans have lower rates. So 15-year mortgages have lower interest rates than 30-year loans, all else being equal.
What Are VA Loan Fees?
For the most part, you’ll pay the same types of fees on a VA loan as what you would for other types of mortgages. But there are some differences, there are certain fees that are allowed, and other that aren’t. The biggest extra fee you’ll need to pay is the VA funding fee, which is a one-time upfront payment of 1.4% to 3.6% of the loan amount for most types of VA mortgages for home purchases. In addition, lenders are allowed, but not required, to add a lender fee of up to 1% of the loan balance.But, under specific circumstances, you may qualify for a VA Funding Fee waiver, and VA loans never charge a mortgage insurance premium. The VA also prohibits lenders from charging certain specific fees on its loans, such as attorney fees, prepayment penalties, or broker commissions. And, if you’re taking advantage of a VA Interest Rate Reduction Refinance Loan (IRRRL), then you may be able to skip the appraisal and save on those fees.
When to Consider a VA Loan
If you meet the military service requirement to qualify for a VA loan, it can be an excellent option. But depending on your personal financial situation you may find that even if you’re eligible for a VA loan, it’s not the best deal for you.
Pros to a VA Loan
Compared to conventional home loans, a VA loan typically has less strict qualification standards. So you’re likely to have an easier time qualifying with a lower credit score or higher debt-to-income ratio compared to other types of mortgages.
VA loans also usually have lower interest rates than comparable conventional loans and never require PMI. A VA mortgage may require you to pay less out of pocket to purchase a home. You can finance 100% of the home’s purchase price and the VA limits certain closing costs. For example, loan origination fees are capped at 1% of the loan amount.
Cons to a VA Loan
The biggest extra expense associated with a VA loan is the initial funding fee. If you don’t qualify for a funding fee waiver, it can be a big consideration. The funding fee is based on the amount of your down payment and whether or not you’ve taken out a VA loan before. While the funding fee can be as little as 0.5% for certain VA refinance loans, it caps out at 3.6% for repeat borrowers who have a down payment of less than 5%.
If you have the ability to put 20% down on your home purchase with a conventional loan, you can waive the PMI requirement and avoid the funding fee at the same time. This negates some of the benefit of a VA loan and because you’re borrowing less you’ll have smaller monthly payments and pay less in interest.
VA loans also have more rigorous appraisal standards than conventional mortgages. In a hot real estate market, sellers are likely to have multiple offers to choose from. So the extra hurdle of having to navigate a VA mortgage appraisal could be a deal breaker because you can’t waive the appraisal contingency on a VA loan.
Who Sets VA Loan Rates?
There is no single entity that sets VA loan interest rates. Instead, individual lenders offer you certain rates based on broader market conditions, your personal financial situation.
The mortgage rates you’re eligible for will vary depending on:
- Type of VA loan
- Credit score
- Down payment
How each individual lender evaluates your finances varies, so you want to shop around. By comparing offers from multiple lenders, you can find not only the loan with the best interest rate, but also with the lowest fees.
How to Find Personalized VA Loan Rates?
You have to compare mortgage lenders to find the best personalized VA loan rates.
The interest rates you can qualify for are based on your credit score, income, and other factors. However, because the VA guarantees the loan you can expect a VA mortgage rate to be lower than other mortgages with similar terms. But you’ll want to pay attention to the annual percentage rate (APR), which also takes some of the upfront fees into account.