VA loans are an excellent option for veterans looking to become homeowners. VA loans backed by the Department of Veterans Affairs should save veterans thousands of dollars.
But a study conducted by Own Up, a mortgage technology firm, found that veterans who don’t shop around could spend thousands of dollars more than necessary on a VA loan.
Don’t Pay Higher Rates for Your VA Loan
In the data, Own Up found a difference of 1.25% between the highest and lowest APR rate lenders charged veterans.
Think that doesn’t sound like much?
Let’s put it into perspective.
A $250,000 loan at 3% for 30 years has a monthly payment of $1,054.
But for the same loan at 4.25% for 30 years, you’ll pay $1,230 per month.
That’s a monthly difference of $176…
And over a 30-year term?
That adds up to a difference of $63,360. And that’s a big deal.
While you would think that all lenders have a veteran’s best interest in mind, the study shows otherwise.
The Wendy Thompson Team has been fighting for every veteran to receive the lowest rate possible for over 20 years.
VA Loans Aren’t Underwritten or Funded by the VA
Here’s the big problem:
VA loans aren’t funded or underwritten by the VA.
Yes, the VA sets guidelines that VA lenders must follow, but that’s it. The VA doesn't set interest rates or some other terms you might find with VA loan lenders.
VA loans are issued through private lenders – lenders who set their own rates and terms.
If you take the first loan offered, you could pay:
- Higher interest rates
- Higher closing costs
- Or both!
All veterans know is they want a mortgage, and a lender is offering one. What they often don't know is there could be better deals available.
No Down Payment Doesn’t Equal Savings
One big benefit of VA loans is the $0 down payment required. But you can get that no matter which lender you go through.
Instead of hyper-focusing on the no down payment, consider the many other factors of VA loans:
- Interest rate or APR
- Origination fee
- Lender closing costs
- Loan term
- Type of interest rate
VA Lenders Have Different Underwriting Requirements
The VA program is known for their relaxed credit requirements. While VA lenders must follow the VA requirements at a minimum, they can add their own requirements, too.
What does that mean?
Each lender requirements you must meet before being given a VA loan.
It could look many ways, but here are a few scenarios:
The VA doesn’t have a minimum credit score requirement, but most lenders require at least a 640.
The VA prefers a maximum debt-to-income (DTI) ratio of 41%, but lenders can require a lower DTI.
Non-Negotiable VA Requirements
Some requirements are standard across all VA lenders, such as:
Borrowers must have a stable income and employment for the last two years.
There must be one to two years between a bankruptcy discharge and a VA loan application.
The home must be for owner occupancy.
You must also obtain a Certificate of Eligibility (COE).
Your COE proves to the lender that you’re eligible for a VA loan.
How can you get a COE?
Generally, you’ll have no trouble if you served:
2 years in regular service
6 years in the Reserves or National Guard
90 days of active duty during wartime
181 days of active duty during peacetime
Check your eBenefits portal for a COE or contact a lender – like us at the Wendy Thompson Lending Team. We can help you get your COE.
Know What Affects VA Loan Rates and Fees
Some lenders will have veterans believe the rate they offer is the lowest rate they’ll qualify for no matter where they go.
But there’s no way to know what interest rate another lender might give unless you apply.
Although it varies by lender, here’s what typically affects interest rates:
Credit scores – The higher your credit score, the better the rate a lender may offer. A higher credit score usually means there’s a lower default risk.
Debt-to-income ratios – Lower DTI can lead to lower rates because it means there’s less money going out each month to debts, and it's more likely that they'll pay their bills on time.
Down payment – VA loans don’t require a down payment, but putting money down could secure a lower interest rate.
VA Loans Have No Limits for Many Borrowers
VA loan limits set a maximum amount you can borrow with a VA home loan. But the Blue Water Navy Vietnam Veterans Act of 2019 eliminated VA loan limits starting January 1, 2020.
There’s just one catch:
You must be a veteran or service member with full entitlement to qualify.
If you already have an active VA loan or have defaulted on a VA loan in the past, limits could still apply.
sample VA loan Rates by Credit score: 600 to 620
760 - 850
700 - 759
680 - 699
660 - 679
640 - 659
600 - 639
*Updated 10/15/19 - Rates are based on a $250,000 loan with a 20% down payment. Rates change often and differ based on your state, down payment, and loan amount.
Keep in mind that rates constantly change so it is best to contact us directly for the correct rate.
Looking for the Best VA Lender?
The VA home loan program is an excellent option for veterans, service members and their families.
But as you can see, it’s not as easy as going with the first lender you come across.
If you’re ready to find the best VA lender, you’ve come to the right place.
Your first step is to pre-qualify for a VA loan.
The Wendy Thompson Lending Team is here to help you find the most attractive VA loan for your situation.
We’re licensed in all 50 states – so, no matter where you’re looking for your dream home, we’ll help you find the VA loan terms that work best for you.