If you are a qualifying military service member—or the family member of a military service member who passed away in service or because of a service-connected disability—you could be eligible for a VA Loan.
VA Loans are loans offered by private mortgage lenders, but they’re insured by the Department of Veterans Affairs. Because of this government guarantee, qualifying for these loans is much easier—even if you have no down payment and a low credit score.
VA home loans also tend to have lower rates than conventional loans. However, rates can still vary from one lender to another. This guide will show you how to get the best VA mortgage rates.
In this guide:
- Average Mortgage Rate
- Mortgage Rates Over Time
- How Do I Find the best VA Mortgage Rates
- Types of VA Mortgage Rates
- Frequently Asked Questions
Average Mortgage Rate
Understanding average rates on conventional mortgages can be helpful to get an idea of what a VA mortgage might cost you. And comparing this average with the rates you’re offered will help you to see how your options stack up.
Although the average VA mortgage rate isn’t indexed by national mortgage lenders, the average conventional 30-year mortgage rate is.
| Avg 30-year fixed mortgage rate | As of |
| 3.55% | 8/22/2019 |
Source: Federal Reserve Bank of St. Louis
Mortgage Rates Over Time
Here’s how conventional mortgage rates have changed over time.
How Do I Find the Best VA Mortgage Rates
Many different factors can affect your VA mortgage rate. Here are six tips to improve the rates you’re offered by a VA-approved lender.
1. Improve Your Credit Score
There is no minimum credit score required to get a VA loan. Still, some lenders will provide more competitive interest rates to borrowers with higher credit scores. You can improve your credit score by reducing your debt and by always making payments to creditors on time.
2. Increase Your Down Payment
You are not required to put down any money on your home in order to qualify for a VA mortgage. Still, making a down payment is a good idea.
A higher down payment could lead to a lender offering you a lower rate, and it will also reduce the total amount of interest you have to pay on your home loan.
3. Shorten Your Loan Term
VA loans can be repaid over different time periods. Shorter home loans are less risky to lenders because they’ll get their money back sooner, so you can usually obtain a lower rate if you opt for a 15-year loan term instead of stretching payments over 30 years.
4. Improve your Debt-to-Income Ratio
Your debt-to-income ratio is calculated by adding up your monthly debt payments and comparing them to your income.
There are both front-end and back-end ratios, with one comparing only housing payments to income and the other comparing total loan payments to income (including the mortgage you’re applying for, student loans, credit card debt, and other monthly payments).
You present less risk to a VA lender if your debt-to-income ratio is lower, so you will likely get a better rate by repaying debt, increasing your income, or buying a less expensive home.
5. Compare Quotes
VA loans don’t come from the Veteran’s Administration; they are only guaranteed by the Administration. Loans come from private lenders and home loan rates can vary from one lender to the next.
It’s important to compare rates and terms offered by a few of the best VA lenders to find the best rate.
It may also be helpful to apply for a home loan from a bank or a credit union where you are already a member. Your existing relationship with these lenders and your history of payments may help them approve you for more favorable rates.
6. Refinance
Some people are surprised to hear that you can refinance VA loans without losing your VA status.
If you already have a VA loan and your financial situation has improved since you originally borrowed, you may be able to refinance your existing debt by getting a new VA mortgage loan. Refinancing could lower your rate, monthly payment, and total interest costs.
Use our mortgage refinance calculator to see how much refinancing could save you each month.
Types of VA Mortgage Rates
When looking for a VA mortgage loan, you’ll have a few different types of loans to choose from.
Fixed-Rate VA Loans
A fixed-rate loan provides predictability in your payments. You start out with a slightly higher interest rate than with a variable-rate loan, but your rate and payments stay the same for the life of the loan.
Your payments are determined based on the total principal and interest needed to repay your loan during your agreed-upon term.
30-Year Fixed-Rate VA Mortgages
A 30-year mortgage is amortized over three decades. Each monthly payment is for the same amount and is calculated based on the principal and interest needed to repay your loan over 30 years. Most people get 30-year mortgages because the long repayment term keeps monthly payments low.
However, this option will cost you the most in total interest paid.
>> Read More: 30-Year Mortgage Rates
15-Year Fixed-Rate VA Mortgages
A 15-year mortgage is amortized over 15 years, so each monthly payment is fixed and is based on what’s needed to repay your loan by the end of the 15-year period.
The payments on 15-year loans are significantly higher than 30-year loans even though interest rates are usually lower. That’s because you pay off your loan in half the time.
You’ll need a higher income to qualify for a 15-year mortgage. But if you can qualify and don’t mind making higher payments, you will own your home in half the time and will pay much less interest over time.
10-Year Fixed-Rate VA Mortgages
A 10-year mortgage is a loan amortized over an even shorter period of time. You’ll pay your loan in just a decade. Monthly payments are very high, so many people won’t be able to qualify.
But interest rates on 10-year VA loans are lower than on mortgages with longer payment terms, and you pay far less total interest over time.
Adjustable-Rate VA Mortgages (ARM)
Like a fixed-rate mortgage, an adjustable-rate mortgage is meant to be repaid over a pre-determined term, and monthly payments are fixed according to that term.
The key difference is that your interest rate doesn’t stay the same. You start with a lower rate than a fixed-rate mortgage, but that rate is tied to a financial index that could increase or decrease over time.
Accordingly, your interest rate could change over time, so an adjustable-rate mortgage may be riskier if you plan to live in your home for a long time.
3/1 ARM
With every adjustable-rate mortgage, your rate is locked in for an initial period of time. In a 3/1 ARM, it’s locked in for three years. That’s what the “3” in 3/1 ARM stands for. The “1” indicates how often rates can adjust each year once your initial three-year period expires.
If you think you’ll sell or refinance your home within three years, this loan can be a good option. You can start with a lower interest rate and lower monthly payments, making it easier to afford a home.
But there’s a risk your payments could become unaffordable in the future if you decide to stay in the home.
5/1 ARM
A 5/1 ARM locks your rate in for five years, and it can then adjust once per year. It’s a slightly less risky alternative to a 3/1 ARM because you have five years to try to sell or refinance. But the rate will likely be a bit higher to start than the rate on a 3/1 ARM.
7/1 ARM
Just like its counterparts, a 7/1 ARM is an adjustable-rate mortgage. But this time the initial rate is fixed for seven years and then can adjust upward once per year. The rates are typically higher than a 5/1 ARM, but the risk is lower because you have seven years to refinance or sell.
Frequently Asked Questions
What is a VA Loan?
VA loans are available to help make it easier for service members, veterans, and their families to buy homes.
The Veteran’s Administration insures or guarantees loans made to eligible service members and veterans by private lenders. Lenders, in turn, can offer much more relaxed qualifying requirements because of the government guarantee.
>> Read More: Home Buying for Veterans
Who’s Eligible for a VA Loan?
You may be eligible for a VA loan if:
- You served for 90 consecutive days during war; 181 consecutive days during a time of peace; or six years in the National Guard or Reserves. You could also be eligible if you were married to a service member who died on active duty or because of a service-connected disability.
- You’re a first-time homebuyer purchasing a primary home and plan to move in within 60 days.
There’s no minimum credit score required for a VA loan, and you do not have to make a down payment.
Do I Still Have to Pay Closing Costs on a VA Loan?
With VA loans, the sellers are allowed to pay or assist with closing costs, but they don’t always do so. You may have some closing costs to pay, so make sure you understand who’s paying what before you make an offer.
There’s also an upfront VA funding fee you need to be aware of when considering your total loan costs. This fee varies based on several factors including your down payment and the loan amount.