Understanding VA Mortgage Rates And LLPA

This Article Is About Understanding VA Mortgage Rates And Loan Level Pricing Adjustments

VA loans are the best home mortgage program in the United States.

The government has created and launched VA loans decades ago to reward qualified members of our U.S. Military to reward them for their service to our country. Only select qualified active-duty and/or retired members of the United States Armed Services with a valid Certificate of Eligibility (COE) are eligible for VA loans. Benefits of VA mortgages are prices.

Understanding VA Mortgage Rates is very important. The VA offers one of the lowest mortgage rates out of any loan program.VA loans don’t have LLPAs (the Fannie/Freddie fee matrix). Instead, VA pricing differences come from lender arate sheets and the overall risk of the loan (cash-out vs IRRRL, credit profile, LTV, property type, lock term, etc.).

That’s why two lenders can quote different VA rates—even though the VA loan benefit is the same.

Quick Answer: Do LLPAs affect VA mortgage rates?

No—VA loans aren’t priced with Fannie/Freddie LLPAs. But VA rates can still vary by lender based on cash-out vs streamline, credit profile, equity/LTV, points, and lock term.

Comparing And Understanding VA Mortgage Rates

Comparing and Understanding VA Mortgage Rates is very important for borrowers when shopping for rates on VA loans.

The VA does not mandate a minimum credit score requirement as long as borrowers can get an approve/eligible per automated underwriting system. However, lenders can require a minimum credit score requirement on VA loans as part of their lender overlays. Overlays are higher credit requirements that are above and beyond the minimum VA Agency Guidelines.

The VA does not have a maximum debt to income ratio cap. However, lenders can require a maximum debt to income ratio cap as part of their lender overlays. There is no maximum loan limit on VA loans.

Again, lenders can create and implement a maximum VA loan limit cap as part of their lender overlays. However, VA mortgage rates will vary from lender to lender. VA rates are mainly determined by credit scores, type of property, loan amount, type of VA loans, and other determinants that we will discuss in the following paragraphs. Gustan Cho Associates are one of the very few national lenders with no lender overlays on VA loans.

FVA Understanding VA Mortgage Rates On Refinances

It’s important to understand VA mortgage rates when refinancing your loan. Many homeowners ask why cash-out refinances have higher rates than rate and term refinances. This difference comes from something called loan level pricing adjustments, or LLPAs. Lenders use LLPAs to manage the risks associated with different types of loans.

Higher risks for lenders lead to higher mortgage rates. Cash-out refinances are seen as high-risk loans compared to rate and term refinances. As a result, if you choose a cash-out refinance with a VA loan, you will face higher rates than a rate and term refinance.

Does LLPA Affect VA Mortgage Rates?

Understanding VA Mortgage Rates: Do LLPAs Affect VA Home Loans and Refinance Rates?

Loan-Level Price Adjustments (LLPAs) do not affect VA mortgage rates or VA refinance rates. Understanding VA mortgage rates is crucial for veterans and active-duty service members considering VA home loans. Unlike conventional loans, VA home loans are not subject to LLPAs. The VA (Department of Veterans Affairs) guarantees these loans, allowing a lender to offer a competitive rate for home loans without the additional risk-based pricing adjustments common in conventional loans.

For those exploring the rate for home loan options through VA programs, it’s essential to know that VA refinance loans, including Interest Rate Reduction Refinance Loans (IRRRLs) and VA cash-out refinances, also remain unaffected by LLPAs.

The competitive nature of VA home loans and refinance rates stems from several factors:

1. Lender Policies: Lenders may offer varying rates based on their policies and market strategies.
2. Market Conditions: General interest rate trends and economic conditions can impact the rates offered on VA home loans and refinance loans.
3. Borrower’s Financial Profile: While VA loans are more lenient, factors such as credit score and overall financial health can still affect the rates offered, although they do not incur specific LLPAs.

Overall, VA home loans provide significant advantages to eligible veterans and active-duty service members, including typically lower interest rates and the absence of LLPAs. Understanding VA mortgage rates helps borrowers make informed decisions and maximize the benefits of VA loan programs.

Changes In VA Agency Mortgage Guidelines

The VA Circular 26-18-30, effective February 15, 2019, updated the guidelines for VA mortgages. Here’s a more straightforward overview of the changes:

1. Loan-to-Value (LTV) Ratio Change:

You can get up to 90% of your home’s value with a VA cash-out refinance. For example, if your home is worth $200,000, you can refinance for up to $180,000.

2. Net Tangible Benefit Test:

This new rule ensures that refinancing is beneficial. You must show that the new loan offers advantages like a lower interest rate, smaller monthly payments, or better terms.

3. Fee Recoupment:

If you choose a Type I cash-out refinance, pay off any fees within three years. The savings from your new loan should cover these costs during that time, so it’s a smart financial choice.

These updates aim to make the loan process fairer and more beneficial for borrowers.

Borrowers Need To Meet The VA Net Tangible Benefit Test

Borrowers need to get a benefit to be able to refinance on VA loans. This holds especially true on cash-out refinances. Borrowers need to meet at least one of the eight lists of the net tangible test criteria. Here is the list of net tangible benefits for borrowers:

• Eliminating the mortgage insurance on a current loan
• VA loans do not have annual mortgage insurance requirements
• The new VA loan term being shorter
• The benefit of lower interest rates
• The new housing payment is lower than the loan being refinanced
• The borrower benefits from a larger residual income by refinancing
• The borrower needs the funds to repair and/or renovate the home
• The borrower is refinancing an adjustable-rate mortgage to a fixed-rate mortgage

For more information about net tangible benefits and whether a refinance is beneficial, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at alex@gustancho.com.

VA Agency Mortgage Guidelines And Requirements

There are two main types of guidelines for VA mortgages:

1. Minimum Guidelines from the VA: These are the basic rules set by the Veterans Administration.
2. Lender Overlays: These are extra requirements that individual lenders can add on top of the VA’s guidelines.

Think of it like a cake recipe. The VA’s minimum guidelines are the essential ingredients to make a basic cake: flour, sugar, and eggs. Lender overlays are optional toppings or fillings that each baker might choose to add, such as frosting or sprinkles. Just as different bakers might have other toppings, different lenders can have varying overlays. However, everyone still needs to start with that same base recipe from the VA!

Understanding VA Refinance Rates

VA loans has the lowest mortgage rates. Many times, VA rates are lower than any other loan programs. However, mortgage rates on VA loans depend on loan level pricing adjustments.

Examples of loan level pricing adjustment or pricing hits on VA mortgage rates are the following:

• Credit scores
• Type of property: Single-family homes, condos, townhouses, 2 to 4 unit multi-family homes
• Cash-out versus rate and term refinance
• Loan size
• County and state
• Manual versus automated underwriting system
• Loan to value
• Lock period
• Lender paid versus borrower-paid
• Other layered risks by lenders

Mortgage rates on cash-out refinance is higher than rate and term refinance due to higher risks.

Closing Costs On VA Loans

Like other mortgage programs, VA loans have closing costs when you buy or refinance a home. A unique cost for VA loans is the VA funding fee.

For VA cash-out refinances, the funding fee is currently:
– Regular military personnel pay 2.15% for the first use and 3.3% for subsequent uses.
– Reserve and National Guard personnel pay 2.4% for the first use and 3.3% for subsequent uses.

To calculate the funding fee, multiply the percentage by the total mortgage loan amount. The cash-out funding fee for VA mortgages is added to the loan balance and financed.

Refinance Seasoning Guidelines On VA Loans

Borrowers with lower credit scores can close on their VA loans and refinance it at a later date once they improve their credit scores. Credit scores are the single biggest determinant of VA mortgage rates. However, there is a waiting period after closing on a VA loan for borrowers to be able to refinance. Borrowers need to wait 210 days from the first payment have passed, and 6 months of payments have been made on the original.

FAQs: Understanding VA Mortgage Rates And LLPA

What Determines VA Mortgage Rates?

VA mortgage rates are set by private lenders, and they move with the broader rate market (bond/MBS pricing, inflation expectations, and overall economic conditions). Your loan scenario (purchase vs refinance, cash-out vs IRRRL, loan size, points/credits, lock term) also affects the rate you’re quoted.

Does the VA Set VA loan Interest Rates?

No. The Department of Veterans Affairs doesn’t set interest rates—it guarantees part of the loan, which helps lenders offer competitive pricing. Different lenders can still quote different VA rates on the same day.

Do LLPAs Apply to VA Loans?

No. Loan-Level Price Adjustments (LLPAs) are a conventional (Fannie/Freddie) pricing structure and aren’t applied to VA loans. VA pricing can still vary by lender, but it’s not because of a formal LLPA fee matrix.

If VA Loans Don’t Have LLPAs, Why Do Rates Still Vary by Credit Score?

Even without LLPAs, lenders price risk using their own rate sheets—so stronger credit, stable income, and cleaner profiles often get better pricing. VA is flexible on minimum credit score rules. However, lenders may still price or underwrite differently based on the borrower’s overall profile.

Why is a VA Cash-Out Refinance Rate Usually Higher Than a VA IRRRL?

Cash-out refinances generally carry more risk (you’re increasing the loan balance and tapping equity), so lenders often price them higher than streamlined refinances. VA cash-out loans also have specific rule requirements that can add friction and cost compared to IRRRLs.

What is a VA IRRRL (VA Streamline Refinance), and Does it Require an Appraisal?

A VA IRRRL is a VA-guaranteed refinance designed to replace an existing VA loan—generally with a lower rate and lower principal & interest payment. In many cases, no appraisal, credit info, or full underwriting is required (with exceptions).

When Can You Refinance a VA Loan? (What is the 210-Day Rule?)

For certain VA-to-VA refinances, the loan must be “seasoned,” meaning the first payment confirmation is at least 210 days before the new note date, and six consecutive monthly payments have been made. VA details this seasoning requirement in its refinancing guidance.

What is the VA “Net Tangible Benefit” test?

VA requires lenders to show you benefit from the refinance (the “net tangible benefit” requirement). For some transactions, there are also rules, such as fee recoupment not exceeding 36 months from the first payment due date.

What is the VA Funding Fee, and How Much is it?

The VA funding fee is a one-time fee that helps keep the VA loan program running; it’s usually financed into the loan amount (if the borrower chooses). The percentage depends on loan type, down payment (if any), and whether it’s your first use, and some borrowers are exempt.

Is There a Loan Limit on VA loans?

If you have full entitlement, VA says you don’t have a loan limit (as long as you qualify and the appraisal supports value). If you don’t have full entitlement, the amount you can borrow without a down payment can be influenced by remaining entitlement and county loan limits.

For more information about VA loans and qualifying with a lender with no lender overlays, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.

This blog about Understanding VA Mortgage Rates And LLPA was updated on January 14th, 2026.