VA Mortgage Rates Versus Other Home Loan Programs

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VA Mortgage Rates Versus Other Home Loan Programs Was PUBLISHED On March 8th, 2019

Mortgage Rates are determined by lenders dependent on the risk they need to take. The higher the risk, the higher the rates. Mortgage Rates on conventional loans is determined by the following:

  • Borrower’s credit scores
  • Down payment
  • Type of property

Higher credit scores determine borrower’s past payment history and likelihood that borrower’s will make their future loan payment on time.

  • Down payment shows borrower has skin in the game
  • Homebuyers with 20% or more down payment on a home purchase will not likely walk away if they run into financial trouble
  • They will do everything possible to make their mortgage payments and avoid foreclosure
  • Single-family homes have the lowest mortgage rates
  • There are Loan Level Pricing Adjustments (LLPA) on two to four unit multi-family financing
  • Mortgage Rates on VA loans are substantially lower than any other loan program’s rates

We will discuss Mortgage Rates on VA loans versus rates of other mortgage programs in this article.

Why VA Mortgage Rates Are Lower Than Other Loan Programs

The Department Of Veterans Affairs created VA Loans in 1944 to reward retired and active duty members of the United States Military as a reward for their service.

  • Over 25 million veterans took advantage of the VA Loan Program since its inception in 1944
  • VA Loans is the best loan program in the U.S.
  • However, only active and/or retired members of the U.S. Armed Services with a valid Certificate of Eligibility are eligible
  • There is no down payment required
  • There is no private mortgage insurance required
  • VA Mortgage Rates are lower than any other loan program
  • Over half a million veterans take advantage of the VA Loan program every year
  • The reason why Mortgage Rates are substantially lower on VA loans than other loan program is due to the government guarantee
  • Lenders can offer 100% financing at very low rates on VA Loans because if borrowers default, the VA will partially guarantee the loss

The skin in the game is the government guarantee by the Department of Veterans Affairs. This is why Mortgage Rates are about 50 basis points lower on VA than conventional mortgage rates.

Loan Level Pricing Adjustments On VA Loans

The Department of Veterans Affairs has created very lenient mortgage guidelines.

  • Under the eyes of the VA, military members normally have less than perfect credit compared to their civilian counterparts
  • This is because, in the event of deployment, they often may have a hard time paying their monthly bills timely
  • Many service members get transferred to other states and changes of addresses can lead to late payments
  • Due to this, borrowers can qualify for VA Loans with bad credit, outstanding collections, charged off accounts, and low credit scores
  • There are no minimum credit score requirements on VA Loans. There is no maximum debt to income ratio caps either
  • There is a two year waiting period after Chapter 7 Bankruptcy, foreclosure, deed in lieu of foreclosure, short sale to qualify for VA Loans
  • Borrowers can qualify for VA Loans one year into their Chapter 13 Bankruptcy Repayment Plan
  • There is no waiting period after Chapter 13 Bankruptcy discharged date
  • However, not all borrowers will get the same VA mortgage rates. Loan Level Pricing Adjustments are pricing hits on VA mortgage rates
  • Down payment does not matter
  • VA offers 100% financing

Does Down Payment Affect VA Mortgage Rates

By putting down payment will not affect VA mortgage rates.

Here is what affects VA Mortgage Rates:

  • Credit Scores
  • Automated Versus Manual Underwriting
  • Type of property (Single-Family versus Multi-Unit Family)
  • Loan Size
  • Debt To Income Ratio

Lenders will take the above risk factors and have pricing hits (LLPA).

Qualifying For VA Loans With Bad Credit With Direct Lender With No Overlays

Borrowers who want the best VA mortgage rates can increase their credit scores. The Team at Gustan Cho Associates can help borrowers boost their credit scores prior to locking their mortgage rates. There are some quick fixes such as paying down revolving credit account balances that can instantly boost consumer credit scores. Borrowers with credit scores in the 500’s will not just get higher rates but may need to pay discount points. Borrowers who need to qualify for VA Loans with the best mortgage rates, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. Gustan Cho Associates at Loan Cabin Inc. are direct lenders with no overlays on VA Home Loans. We are available 7 days a week, evenings, weekends, and holidays.

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