Brai is the founder of SW4 Insights, a public policy advisory firm based in Washington D.C. He has over a decade of experience as a journalist and consultant covering finance and economic policy, with a particular focus on distilling complex topics t.
Brai Odion-Esene ContributorBrai is the founder of SW4 Insights, a public policy advisory firm based in Washington D.C. He has over a decade of experience as a journalist and consultant covering finance and economic policy, with a particular focus on distilling complex topics t.
Written By Brai Odion-Esene ContributorBrai is the founder of SW4 Insights, a public policy advisory firm based in Washington D.C. He has over a decade of experience as a journalist and consultant covering finance and economic policy, with a particular focus on distilling complex topics t.
Brai Odion-Esene ContributorBrai is the founder of SW4 Insights, a public policy advisory firm based in Washington D.C. He has over a decade of experience as a journalist and consultant covering finance and economic policy, with a particular focus on distilling complex topics t.
Contributor Chris Jennings Loans & Mortgages EditorChris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a n.
Chris Jennings Loans & Mortgages EditorChris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a n.
Chris Jennings Loans & Mortgages EditorChris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a n.
Chris Jennings Loans & Mortgages EditorChris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a n.
| Loans & Mortgages Editor
Updated: Sep 6, 2024, 8:31am
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
Getty
A mortgage loan backed by the Department of Veterans Affairs, called a VA loan, is a mortgage option for current or former members of the armed services.
VA loans usually have no or low down payment requirements and lower interest rates than traditional mortgage products. They also tend to be more flexible, allowing for a higher debt-to-income (DTI) ratio and lower credit scores, and don’t require private mortgage insurance (PMI).
The best way to compare current VA loan rates is to submit applications with multiple lenders. Each lender who approves your application will give you an official loan estimate showing the interest rate, closing costs and other key features of the mortgage you qualify for.
When reviewing the estimates, pay close attention to any discount points listed as closing costs. These upfront charges represent prepaid interest and will lower your interest rate for as long as you have the loan. You might be able to get the same rate from one lender without paying points as you can get from another lender who does charge points.
To get an idea of what your monthly payment would be at today’s interest rates, you need to know how much you’re borrowing, whether your interest rate is fixed or adjustable, and how long your loan term is.
For instance, if you have a starting loan balance of $350,000 on a 30-year fixed-rate VA home loan, here’s approximately what you can expect to pay in principal and interest every month:
VA home loans are provided by private lenders such as banks, credit unions and mortgage companies. The VA guarantees a portion of the loan, meaning they are on the hook for a percentage of the amount borrowed in the event of a default. This backstop encourages the lender to provide you with more favorable loan terms.
This loan product comes with low or zero down payment options and no monthly PMI requirement. Most lenders offer VA loans with 10-, 15-, 20-, 25- or 30-year terms, with fixed or adjustable rates.
FEATURED PARTNER OFFERCompetitive with the national average
On Veterans United's WebsiteCompetitive with the national average
The VA offers a variety of home loan programs to help buy, build or improve a home as well as refinance your existing mortgage loan.
You must be a veteran, active-duty service member, a member of the National Guard, reserve or the surviving spouse of a veteran to qualify for a VA loan. A Certificate of Eligibility (COE) from the VA is required. You can apply for your COE online or by mail, or your lender can get it for you.
You can check the full list of eligibility requirements here.
VA loans usually don’t require a down payment and carry lower interest rates than traditional mortgage products. They also tend to have less rigid debt-to-income (DTI) ratio and credit score requirements, and no mandatory private mortgage insurance. These are the general guidelines for who can get a VA loan:
If you have a full VA loan entitlement, you can borrow as much as your financial circumstances allow—in other words, as much as a lender says you qualify for.
If you have an existing VA loan or have defaulted on a VA loan, you won’t be able to borrow more than the conventional conforming loan limits. In most parts of the country, the VA loan limit is $726,200 in 2023. In Alaska, Hawaii, Guam and the U.S. Virgin Islands, the limit is $1,089,300 in 2023.
The federal government adjusts these limits each year to reflect changes in average home prices.
The VA loan includes a funding fee, put in place by Congress to ensure there is enough money in the program to cover its loan commitments and ensure loan terms are always affordable.
Your lender will also charge other closing fees. Many lenders charge a flat 1% loan origination fee, as well as additional fees. It should be part of your checklist while shopping around to know what loan costs may be added to your overall amount.
The funding fee is a percentage of your total loan amount. It varies based on whether this is your first time making use of the benefit, how many times you’ve used this benefit and the size of your down payment. Funding fees typically range between 1.4% to 3.6% for purchase loans.
You can pay the funding fee either by including it in your overall mortgage loan (also known as financing) and pay it off over time, or you can choose to pay the full fee at closing.
If you used a VA loan to buy a manufactured home, you only have to pay the first-time use funding fee.
While there are no prohibitions against using a VA loan more than once, you won’t enjoy the same benefits as a first-time homebuyer, especially if you plan on keeping your previous VA-backed home.
The Department of Veterans Affairs does not set mortgage rates. Your lender will determine the rate on your VA loan based on market rates, your credit profile and your financial situation. You may qualify for a lower interest rate if you choose to make a down payment.
Check your rates today with Better Mortgage.
There are many companies online that rank lenders offering VA loans, nationally and in your local area, and provide daily interest rates information. Alternatively, you can work with a mortgage broker that specializes in helping veterans and active-duty military.
You should get a loan estimate from multiple lenders and compare the loan offers using the Consumer Financial Protection Bureau’s (CFPB) guide.
Knowing what factors affect your VA loan interest rate could save you money or allow you to borrow more. If you plan on applying for a VA loan in the near future, look to improve some of these aspects of your finances to potentially get a lower rate:
VA loan purchase rates refer to the interest on a loan to buy a home, while a VA refinance rate will be your new interest rate after you refinance your mortgage.
A VA loan is only available to veterans, active-duty military, reserves or National Guard. A 30-year fixed mortgage, commonly referred to as a conventional mortgage, is available to everyone. It comes with a different interest rate, requires a down payment and might also require PMI depending on how much you put down.
While it is a commonly-held belief that VA loans have lower interest rates than conventional loans, that’s not necessarily true. Financial institutions that cater to veterans and active-duty personnel may offer lower interest rates compared to conventional loans. So it’s important who you chose as a lender and to shop around at the outset.
You cannot use a VA loan to purchase land by itself, even if you intend to build a home later. You must be building a house at the same time in order to be eligible.
A VA loan can only be used to fund the purchase of a home that will be your primary residence. The VA has an occupancy requirement mandating that you move in within 60 days after closing. You cannot use the property as a seasonal vacation home.
The speed at which you can secure a VA loan will depend on how quickly you can provide the necessary documents to confirm your eligibility, prove your ability to meet the financial commitments and show that the home you want to buy meets the VA’s Minimum Property Requirements.
There is no minimum credit score requirement, but borrowers are advised to have a minimum credit score of between 580 to 620 to qualify for a VA loan.
To get preapproved for a VA loan, contact an approved VA lender. Once it has confirmed your eligibility, credit profile and financial status, the lender will preapprove you.
Helping You Make Smart Mortgage & Real Estate DecisionsGet Forbes Advisor’s ratings of the best mortgage lenders, advice on where to find the lowest mortgage or refinance rates, and other tips for buying and selling real estate.
Thanks & Welcome to the Forbes Advisor Community!This form is protected by reCAPTCHA Enterprise and the Google Privacy Policyand Terms of Serviceapply.
By providing my email I agree to receive Forbes Advisor promotions, offers and additional Forbes Marketplace services. Please see our Privacy Policy for more information and details on how to opt out.
Was this article helpful? Share your feedback Send feedback to the editorial team Thank You for your feedback! Something went wrong. Please try again later. Buying Guide
By Caroline Basile
By Caroline Basile
By Caroline Basile
By Caroline Basile
By Caroline Basile
By Caroline Basile
Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results.
Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners.
ContributorBrai is the founder of SW4 Insights, a public policy advisory firm based in Washington D.C. He has over a decade of experience as a journalist and consultant covering finance and economic policy, with a particular focus on distilling complex topics to inform readers' decision-making.
© 2024 Forbes Media LLC. All Rights Reserved.
Are you sure you want to rest your choices?The Forbes Advisor editorial team is independent and objective. To help support our reporting work, and to continue our ability to provide this content for free to our readers, we receive compensation from the companies that advertise on the Forbes Advisor site. This compensation comes from two main sources. First, we provide paid placements to advertisers to present their offers. The compensation we receive for those placements affects how and where advertisers’ offers appear on the site. This site does not include all companies or products available within the market. Second, we also include links to advertisers’ offers in some of our articles; these “affiliate links” may generate income for our site when you click on them. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impact any of the editorial content on Forbes Advisor. While we work hard to provide accurate and up to date information that we think you will find relevant, Forbes Advisor does not and cannot guarantee that any information provided is complete and makes no representations or warranties in connection thereto, nor to the accuracy or applicability thereof. Here is a list of our partners who offer products that we have affiliate links for.
