Today's VA Loan Rates

If you're an active member or veteran of the U.S. military, or the spouse of a former military member who died in the line of duty, you may be eligible for a VA loan. VA loans generally require no money down, and they can be a good mortgage for borrowers with poor credit. Here's an overview of today's VA mortgage rates.

What is a VA loan?

A VA loan is a mortgage that's backed by the U.S. Department of Veterans Affairs (VA). The benefit of getting a VA loan is not having to put money down toward the purchase of your new home. The VA itself does not provide home loans. Private lenders like banks, credit unions, and mortgage companies do, and the VA guarantees a portion of the loan. This means lenders can provide veterans and service members with more affordable terms.

There's technically no minimum credit score requirement for getting a VA loan, though individual mortgage lenders may set their own thresholds. A VA loan is often the best home loan product for service members and veterans. Here are some of the biggest benefits.

No down payment required

One of the biggest advantages of VA loans is that they require no down payment, but certain lenders may require it for some borrowers using the VA home loan guaranty.

The VA home loan guaranty is an agreement that VA will reimburse the lender if there is a foreclosure. This takes the place of a down payment, which is why many lenders do not require one.

In comparison, an FHA loan typically requires a 3.5% minimum down payment. Most conventional loans will require a 5% to 20% minimum. No down payment requirement is a huge benefit for military service members who often have to move frequently and struggle to save for a large down payment. However, the monthly payment will be higher since they will be borrowing more money and have less equity in the property.

Competitively low interest rates

VA loans typically have lower interest rates than conventional loans, which can save you a significant amount of money over the life of your loan. Since the federal government supports these loans, lenders charge competitive rates for eligible veterans and service members. In this way, VA loans can also be a good fit for mortgage borrowers with bad credit.

The VA does not set the interest rates -- lenders determine the rate based on a home buyer's specific financial situation. This is why it is important to shop around for the best rate.

Limited closing costs

Closing costs are fees you pay your lender to process your loan. They may include origination fees, home appraisal fees, title search fees, and other charges. VA loans' origination fees are limited to 1% of the total loan amount, while conventional loans typically charge between 0.5% and 1%. VA loans tend to have fewer closing costs, which may be paid by the seller, lender, or any other party. There is also no penalty for paying off the loan early.

As with conventional mortgages, your closing costs with a VA loan will generally fall between 2% and 5% of your loan amount. Your funding fee, meanwhile, will depend on whether this is your first VA loan and whether you're making a down payment.

For your first VA loan, you'll pay a 2.3% funding fee. For subsequent applications, you're looking at a 3.6% fee. But if you're able to make a down payment of at least 5% but less than 10%, your funding fee will be 1.65%, whether this is your first VA loan or not. With a down payment of 10% or more, your funding fee will be 1.40% for a first or subsequent application.

The VA will waive the funding fee completely for certain individuals, allowing them to save even more money:

• Veterans receiving VA compensation for a service-connected disability.
• Veterans entitled to receive VA compensation for a service-connected disability, but receiving retirement pay or active service pay.
• Unremarried surviving spouses of veterans who died in active service or from a service-connected disability.
• Service members with a proposed or memorandum rating from VA, prior to loan closing, who are eligible to receive compensation as a result of a pre-discharge claim.
• Service member on active duty who provides, on or before the date of loan closing, evidence of having been awarded the Purple Heart.

No need for private mortgage insurance (PMI)

Unlike conventional loans, VA loans don't impose private mortgage insurance (PMI) -- a premium borrowers must usually pay when their down payment is less than 20%. This can save you hundreds of dollars each month and make your monthly payments more affordable.

PMI is a type of insurance that protects the lender if a homeowner is unable to pay their mortgage. PMI is usually required on conventional loans if you make a down payment of less than 20% of the total mortgage amount. This way, the lender is protected in case of a default.

The Federal Housing Administration (FHA) requires borrowers to self-insure against potential financial loss by paying a mortgage insurance premium (MIP). Not having to pay PMI or a MIP can save money on a monthly mortgage payment for those with a VA loan.

Lifetime benefit

Service members and veterans can use the VA Home Loan guaranty multiple times throughout their lifetime. In addition, there's no loan limit with full entitlement. That means that as long as they can afford the loan, the VA will back loans in all areas of the country, regardless of home price. This can help home buyers struggling to find a home in their desired location due to price constraints.

How to find the best VA loan rates

Shopping around with different lenders is the best way to snag the most competitive VA loan rate you might qualify for. You can apply online for multiple VA loans at once, and doing so within the same 30-day period is better for your credit score than spreading your search out. (Each time you apply for a loan, it results in a hard inquiry on your credit record that can cause a slight drop to your score, but multiple hard inquiries for the same purpose in a short time frame generally count as a single inquiry.) Many lenders who offer conventional loans offer VA loans as well.

When shopping around for a VA loan, keep the following items in mind:

• The interest rate you're eligible for
• The closing costs (these can vary from lender to lender)
• The loan terms (such as how long you have to pay it off)

Is a VA loan right for me?

To first qualify for a VA loan, home buyers must meet the following conditions:

• Active-duty service members and veterans who have discharges other than dishonorable.
• National Guard and Reserve service members and veterans with an honorable discharge.
• Certain eligible spouses, and other uniformed service personnel may also be eligible for VA home loan guaranty benefits.
• If you are unsure of eligibility, you can go to VA.gov to find out. You will need to get a Certificate of Eligibility (COE), which verifies your eligibility to a lender, to apply for a VA loan.

Benefits

A VA loan could make it possible for you to buy a home with no down payment. If you can afford your monthly mortgage payment but simply lack the savings for a down payment, it makes sense to apply for a VA loan and see what rates you qualify for. Certain individuals are eligible to have their VA funding fee, which amounts to 2% to 5%, waived.

In addition, VA loans have no PMI and typically have fewer closing costs than conventional loans. Further, the funding fee that applies to VA loans can be rolled into your mortgage so you pay it off over time, rather than upfront. You may also have the option to roll your closing costs into your loan so if you're short on funds right now, you can still buy a home.

Disadvantages

VA loans require a funding fee, which is a percentage of the loan amount. This fee can be added to the loan amount, but it will increase your monthly payments. VA loans are only available to eligible military service members, veterans, and eligible surviving spouses.

VA loans have strict requirements for the condition of the property being financed. This means that some fixer-upper properties may not qualify for a VA loan. The VA also requires a specific appraisal process for determining the value of the property being financed. This process can take longer than a conventional appraisal and may require additional inspections.

Despite the advantage of not having to make a down payment, purchasing a home with no money down carries certain risks. One of these risks is the potential delay in building equity in the property. Additionally, if the value of your home decreases after you purchase it, you may end up owing more on your mortgage than your house is actually worth.

VA loans are only available for purchasing primary residences, not vacation homes or income-generating properties. However, it is possible to apply for a VA loan multiple times for primary homes, which can be an advantageous way to obtain the necessary financing.

Before buying, consider the costs and benefits of homeownership

Homeownership offers long-term benefits such as relatively stable monthly mortgage payments and a way to build wealth for you and your family. However, it's crucial to determine your priorities, such as determining how much you're willing to spend each month on a mortgage and other expenses like child care and vehicle costs.

Ultimately, only you can decide what housing and financial needs meet your wants and requirements. The VA strongly encourages you to consider these factors before buying a home. Due to the advantages of VA loans, most veterans and service members will benefit from it over a conventional loan, especially if you are eligible to have your VA funding fee waived.