VA loan rates and the differences between 5% and 6%

VA Rates have been rising over the last couple of weeks. This is mostly because the stock market is getting stronger and investors are taking their money out of the bond market and putting it into the stock market. (Bond markets affect mortgage rates). Many military buyers are asking if they should buy now or wait to see if rates will come back down.

It’s difficult to say what direction the VA Rates will move this week, next week and beyond. The economy is slowly recovering so we could see rates continue to rise to the 6.5% levels as investors continue to put their money into the stock market.  At the same time, there are many unknown factors. The government has been pumping a lot of money into the housing industry buying up bad loans. This could cause rates to fall back down as more investor money is made available. Some investors don’t like the risk of the stock market and prefer to keep their money invested in real estate which traditionally has always been the safer investment. More money in the bond market means lower rates.

What you need to consider is the difference in monthly payment and your current needs. On a $200,000 loan the difference between 5% and 6% interest rate is $125.64 a month, That can be a big difference when you have a limited income. If you can’t afford the increased payment then you simply buy a slightly cheaper house. For instance:

A house priced $200,000 at 5% equals a $1073.64 Principle and interest payment (not including taxes and insurance)

A house priced $180,000 at 6% equals $1079.19 Principle and Interest payment.

Now the difference is $5.55 as opposed to $125.64.

So you buy a home today that is $20,000 cheaper, but because of the current housing market conditions and the fact many home values have dropped 20% or more, you’re really getting a $216,000 dollar home for the price of $180,000! So you’re still in a better position to buy now as rates increase than risking the wait for rates to come back down while home prices rise during the economic recovery period. So what are you waiting for? Say yes to that house you’ve had your eye on and Contact us! We will strive to help you get the best rates possible!

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