A Beginner’s Guide To 30-Year Fixed VA Mortgage Rates
Between mortgages, credit scores, and loan eligibility, the process of buying a home can be pretty complicated. However, military veterans and active-duty personnel have the distinct advantage of using VA loans when canvassing for homes – especially if they’re looking for longer terms, like 30-year loans.
But how exactly do these loans work, and what can you expect from 30-year fixed VA rates? This guide outlines the basics of VA loans, how they affect your mortgage rate, and how rates are calculated on a per-case basis.
VA Loans Explained
VA loans are mortgages guaranteed by the US Department of Veterans Affairs (VA) but issued by private lenders like banks, credit unions, or mortgage companies. This home loan option aims to help US veterans, active duty service members, and even surviving military spouses who haven’t remarried purchase a primary residence with relatively low-interest rates and attractive payment terms.
VA loans were established in 1944’s GI Bill of Rights, and many veterans continue to reap the benefits today. In fact, veterans have a homeownership rate of 76% versus 62% of the non-veteran population.
But how exactly do these mortgage loan options work, and can anyone with a military affiliation apply for one? Read on to find out.
How It Works
VA home loans are covered by something called the VA home loan guaranty. Unlike adjustable-rate mortgages, lenders are protected from loss if a buyer defaults on their monthly payment – making them more likely to give out attractive interest rates for qualified buyers. However, your final interest rate can still be influenced by several factors despite your VA-backed mortgage.
Regardless, the VA home loan guaranty doesn’t just cover first-time buyers. As long as the property will be your family’s primary residence, the guaranty can cover varying loan amounts for repairs, alterations, or major renovations. On top of relatively low mortgage interest rates under ideal circumstances, qualified military service personnel may also find that lenders won’t require any down payment.
Because VA loan rates are so attractive, the requirements for the application can be quite specific. A borrower qualifies for a VA mortgage if they fulfill the following eligibility criteria:
They are an active duty service member or honorably discharged veteran with more than 90 consecutive days of active service during wartime or 181 days of active service during peacetime.
They have served in the National Guard or Selected Reserve for more than six years.
They are the spouse of a service member who died while on duty. This only applies if you have not remarried before the age of 57 or if you remarried before December 16th, 2003. Spouses of prisoners of war or missing service members can also apply.
They meet the lender’s minimum credit score requirements. While the VA has no minimum required credit score, your loan officer needs this information to evaluate your VA mortgage.
The property being purchased meets safety standards and building codes.
Any borrower interested in going through the application process will also have to present a Certificate of Eligibility(COE). This can be obtained from the VA directly, their website, or through a lender.
Whether you’re applying for a 30-year VA loan or a 15-year VA loan, you enjoy the same benefits. Here are some of the most relevant advantages of having a VA loan:
No down payment: A VA loan is one of the few remaining loan types that can get you a zero-down payment home today. That means you won’t have to calculate for any loan-to-value ratios, and the barrier for entry for your mortgage is relatively low.
Competitive interest rate: 30-year VA loans are generally cheaper than 30-year FHA and conventional mortgages.
No maximum base loan amount: One of the best things about VA mortgage loans is that sky’s the limit when it comes to your base loan amount. However, the VA will only cover a specific portion of your total mortgage – currently, it’s $548,250 for single-family homes, but this is subject to change without notice.
No Private Mortgage Insurance (PMI): Because VA covers part of your purchase loan amount, you don’t have to pay for Private Mortgage Insurance – this can make a significant difference in your monthly payments. Private Mortgage Insurance payments can account for tens to hundreds of dollars on your monthly payment amount. That means you really will be getting the lowest possible mortgage rates on your home!
No definite credit score requirements: Your credit score can easily be affected by things like student loans and credit cards, therefore impacting your eligibility for a conventional mortgage. However, unlike a conventional loan, VA loans don’t require good credit – making it easier to lock down real estate.
Assistance for struggling borrowers: The VA offers assistance for borrowers struggling to pay off their current mortgage. This happens through a third-party agent that negotiates your mortgage rate on your behalf.
Limited additional costs: When securing a mortgage, you generally have to pay your real estate agent as well as closing costs. VA loan options limit closing fees to only 1% of total loan amounts, helping you save even more versus 2-5% closing fees on traditional loans.
Every loan type has its share of drawbacks, and your VA loan is no exception. Here are some of the main disadvantages that come with buying a VA loan.
Zero down payment can be dangerous: Having a zero down payment requirement means you’re borrowing the full value of your property through your home loans. As a result, you have no home equity – leaving you more vulnerable in a declining real estate market. However, asking your lender for a rate lock can protect you from a surge in interest rates.
VA funding fee is paid out-of-pocket: When you take out a VA loan, you’re expected to settle the funding fee yourself. Rates on these payments range from 1.25% to 3.3% of the total loan amount. While this may sound small, you can expect to pay thousands of dollars if your current mortgage is worth more than $300,000. That’s because these fees are usually integrated into your monthly payments, which can inflate the amount you pay on interest rates.
Low VA mortgage rates can be deceptive: Generally speaking, a 30-year fixed VA mortgage rate is slightly lower than a conventional 30-year fixed-rate mortgage. However, both will cost you more than 15-year fixed-rate mortgages. That’s because extended payment periods mean more money put toward your interest rate.
You can’t buy investment properties or vacation homes: Because of how your VA loan is structured, you’re not allowed to buy a second property using the VA benefits. However, you can use it to buy another house if you’ve paid off your loans and sold your first property.
30-Year VA Loan Mortgage Rates: How Are They Decided?
Now that you have your requirements on hand and you’ve decided on a 30-year fixed-rate payment plan, you may be wondering how much it’s going to cost. While there’s no definitive answer to suit all buyers, there are a few things that can impact your mortgage rates. This section addresses some of the most common factors that directly affect your rates.
Your Credit Score
Your rates are based on various factors, but your credit score is the primary consideration in most cases. Borrowers with better credit scores get more desirable mortgage rates on 30-year fixed loans. That’s because your credit score is a representation of your payment history, credit cards, and other loans – which lets lenders know how likely you are to make each monthly payment.
While borrowers taking advantage of VA loan rates don’t have a minimum credit score requirement, having a low credit rating can still drive up your rate. That’s because individual lenders have specific credit standards that can influence your final mortgage rates.
One of the main determining factors is your quoted interest rate, especially for a VA loan. While having a VA loan means you’re entitled to better mortgage rates, the VA doesn’t actually set these rates. Instead, your VA loan rates are decided by your lender, which broadens the range of how much money you’ll have to borrow.
Mortgage rates are subject to change often because they're partially determined by bond market health. That means VA loan rates can fluctuate several times within a day, and two lenders can give you vastly different rates. We recommend asking for mortgage quotes for your specific credit rating without any discount points taken into consideration.
Alternatively, if you find a deal with an excellent quoted rate, you can always ask for a rate lock. Keep in mind that this may cost you long-term.
Annual Percentage Rate (APR)
One thing to note about your VA loan rate is that it isn't always wholly representative of how much you’ll be paying on your 30-year fixed mortgage – that’s where the Annual Percentage Rate (APR) comes in. But how does an APR differ from your interest rate?
The interest on your 30-year fixed-rate mortgage tells you how much you pay each year. However, it doesn’t consider any additional fees (like discount points) that need to be settled to maintain your mortgage. In contrast, your Annual Percentage Rate (APR) reflects a broader spectrum of fees. That’s why your APR can be a useful tool when comparison shopping for 30-year fixed-rate mortgage plans.
You receive the APR for a specific mortgage when you ask for a quote. Each APR includes your interest rate plus all additional costs such as:
Origination fees and costs
Closing real estate agent fees
Other transaction-specific fees
Loan-specific details like the price of the house you’re trying to buy and your chosen term length also play a large part in determining your total loan amount. More expensive homes require larger loans, which lenders might find risky. This may result in a higher interest rate and a more expensive mortgage overall.
Term length also plays a large part in your mortgage rates. Shorter-term loans, like those with a 15-year fixed rate, generally have lower interest rates and lower overall costs in exchange for higher monthly payments. Conversely, veterans that are settled on longer, 30-year fixed-rate loans pay less monthly, but a higher mortgage rate may apply.
Lenders may offer a different interest rate depending on which state you live in – this also applies to VA mortgage rates. To get the most accurate interest rate for your specific circumstances, use our VA Loan Rates Comparison tool! All you need to do is input your loan type, ZIP code, purchase price, down payment, credit rating, and term length for an accurate estimation.
Do note that state-specific considerations may apply to local lenders. That means while our estimation is a relatively accurate representation of your potential mortgage rate, we recommend shopping around for a better idea of the rates available for your specific loan type.
How Does A 30-Year Fixed-rate Mortgage Compare To A 15-Year Fixed Mortgage Rate?
Part of getting the most out of your VA-backed mortgage rate is understanding which options are available to you. 30-year mortgages may seem initially attractive because of their more forgiving payment terms, but how do their rates measure up against shorter terms, like 15-year fixed loans?
Unlike “conventional” or non-government loan options, VA mortgages don’t have a down payment, so that means you don’t have any home equity at the start. Therefore, the amount you pay depends on the housing market, your perceived risk as a buyer, plus how long you have left to pay.
Generally speaking, 30-year mortgages tend to have higher interest rates but lower monthly payments. On the other hand, 15-year fixed mortgages have lower interest rates but higher monthly payments. While the difference between the two interest rates can be as small as 0.5% of your total loan, it can add up over the years.
Here’s a concrete example. Let’s say you have a $250,000 loan. If you decide to get a 30-year VA-backed mortgage with a 3.33% interest rate, you’re looking at roughly $140,000 in interest. Conversely, a 15-year loan with an interest rate of 2.77% would only set you back an additional $55,000.
Therefore, longer plans are an excellent choice for people that want lower monthly payments, but 15-year mortgages cost less in the long run. The best option really depends on your specific financial circumstances.
With its zero down payment policy and lax credit requirement, buying a home with VA-backed loans can be a game-changer for many veterans and military spouses. 30-year mortgages, in particular, can soften the financial blow of monthly payments. However, every mortgage is slightly different, and each lender has specific terms that may affect your payment plan.
That’s why we recommend connecting with experts that can help you get the best rates, regardless of your term length! Contact Wesley Mortgage, LLC to find out how we can help.