VA home loans are an attractive option thanks to their low or even nonexistent down payment requirements. But even with no money down, borrowers still have to pay off the loan plus interest over time. So it’s reasonable to wonder – with so many lending programs out there, do VA loans offer competitive interest rates?
In this article, we’ll explain what VA loans are, who is eligible for them, and how their interest rates truly stack up against rates for conventional loans and other mortgage programs.
What Are VA Loans & Who Is Eligible?
VA loans are mortgage loans guaranteed by the U.S. Department of Veterans Affairs. They were created to help eligible veterans, active-duty service members, and surviving spouses access home financing more easily and with no down payment in most cases. Since the program started in 1944, over 20 million VA loans have been issued to qualifying service members.
You may qualify for a VA home loan if you’ve served at least 90 days of active duty during wartime or 181+ days during peacetime and received an honorable or general under honorable conditions discharge. Active-duty service members are also typically eligible after serving a minimum of 181 days. In addition to veterans and active-duty personnel, widowed spouses of service members who died in the line of duty or from a service-related cause may qualify for VA home loans.
VA Loan vs. Conventional Loan Interest Rates
VA home loans tend to have lower interest rates compared to conventional loans. On a 30-year fixed-rate mortgage, it’s common for VA loans to have interest rates 0.5 to 1 percentage point lower than the best rates for conventional loans.
Over 30 years, that interest savings make an enormous difference. On a $300,000 loan amount, 1 percentage point in rate savings equals over $100 less in the monthly payment plus nearly $30,000 less in total interest paid over the full term.
The reason VA loans offer better rates is that the government guarantee provides financial assurance to lenders. This allows lenders to offer better pricing in the form of lower interest rates.
VA Loan vs. FHA Loan Costs
VA home loan costs also tend to beat out Federal Housing Administration (FHA) loan pricing. The primary reason is that FHA loans require both mortgage insurance premiums and upfront mortgage insurance fees.
These costs are avoided with VA loans since government backing eliminates the need for private mortgage insurance. Even with paying VA funding fees, VA loans cost less overall in most cases.
Take Advantage of Your VA Home Loan Benefits
If you’re looking to purchase a home or refinance soon, Mortgage Solutions Financial is here to help. Our team of experts specializes in helping military borrowers and their families access VA home financing. Call today to get in touch!