Section 2.12

VA Loan Rates: An Overview

Are you looking for a home loan with a low interest rate? As we discussed in the last article, VA loans pretty much beat out all other loan types when it comes to getting the lowest rate.

In this article, we'll explain why VA loans are able to get such low rates, and we'll also cover rate shopping and how locking your rate can help you get a home loan you can afford.

Why VA Rates Are So Low

The main reason why VA loans are able to get such great rates is because of the government's backing. The 25% guarantee of every VA loan reduces the risk a lender takes when lending money.

This reduced risk then gets passed onto borrowers, like you, as lower interest rates.

However, since both USDA and FHA loans are also backed by the government, the VA's guarantee can't be the only reason VA rates are lower.

So what is the other reason that makes VA rates so low?

It still goes back to reduced risk for lenders. The fact of the matter is that VA loans have the lowest foreclosure rate out of all loan types. Statistically speaking, lenders know that a VA loan borrower is less likely to default than other borrowers.

So, basically, you have your military brothers and sisters to thank, at least in part, for such incredible VA loan rates. The sense of duty and loyalty shared by servicemembers and veterans can achieve amazing things.

When interest rates are going up, shopping around for rates is even more important.

How Rate Shopping Can Get You an Even Better Rate

Business is all about competition. If you can get lenders to fight for your business, you'll be more likely to get a better deal.

That's because, when getting a VA or any other type of loan, the first offer is rarely the lowest. But if you can get a couple of lenders competing, they will usually offer you a lower rate in hopes of winning you over and beating out their competitors.

However, in order to shop around successfully, you'll need to contact at least two or three lenders and get written offers from them. You can then take these written offers to the other lenders and ask if they can beat the quoted rate.

Rate Locking

After you've gotten lenders to compete and you've gotten the lowest rate possible for your situation, you want to make sure that rate doesn't slip away.

See, rates change every day, so when you find a rate you like, you'll want to lock it down. Just because a lender offers you a rate today doesn't mean it will still be available tomorrow.

So, how does a rate lock work?

Basically, you let your lender know you'd like to accept their offer and ask them to lock the rate. The lock won't last indefinitely—most of the time you can choose to lock your rate for a period of either 30 days, 45 days, or 60 days.

In order to keep the locked rate, you'll need to make sure you schedule your loan closing so that it occurs before the lock expires.

While it's always possible for rates to drop after you've already locked yours in, that's part of the gamble of getting a home loan. However, if you have an honest and experienced loan officer, they should be able to let you know if they think you should wait or move forward with the lock.

Get the Lowest Rate for Your Situation

Now that you understand why VA rates are so low, and you know how to shop for your rate and lock it down, you're ready to dive even deeper into VA loans.

Or, if you're ready to start your application, don't hesitate to give us a call today. We'd love to see what low rates we can offer you for your VA home loan or answer any questions you might have about the process.