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Where to Find the Most Affordable VA Loan Rates
Author David Schneider | Jan 07,2008
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Military veterans looking to purchase a home are probably aware of the loan programs available through the VA. Finding an affordable rate on a VA loan is a little bit easier. However, it's necessary to understand how the programs work and where to look for the best rates.What Are VA Home Loans?At the end of the World War II, the U.S. government sought to help military veterans return to productive life and work at home. Through the Veterans Administration (now known as the U.S. Department of Veterans Affairs), a package of benefits known as the "GI Bill" was introduced to accomplish this goal. One of those benefits was a financial assistance program to help servicemen purchase homes. Nowadays, there are several different VA home loan programs available to qualified military veterans. However, it is important to note that the VA does not guarantee the most affordable rates for home loans.Who Can Apply for VA Loans?As a U.S. military veteran, you are eligible to apply for VA mortgage loans if you meet certain criteria. For military service before Sept. 7, 1980, you must have been on active duty for at least 90 days during wartime, or 181 consecutive days during peacetime. For military service after this date (or Oct. 16, 1981, for officers), the time requirement is two years. Members of the U.S. National Guard and military reservists are eligible after six years of service. If you have separated from service, your discharge cannot be listed as dishonorable. Public health service workers, cadets at service academies and certain other service members are also eligible. Surviving spouses of military veterans who do not remarry may also apply for VA loans.How Do VA Loans Work?Despite the name, VA loans are not really loans made by the government. Rather, the VA insures a portion of a mortgage loan made by an open-market lender. By insuring mortgage loans, the VA provides lenders with greater security and less risk of default. In turn, lenders can offer favorable terms to veteran borrowers. These favorable terms generally consist of zero down payment, no private mortgage insurance (PMI) and reduced closing costs. Because the VA does not make loans directly to veterans, it cannot control the interest rates charged on the mortgages. VA loans are subject to the same market forces as regular mortgages, and lenders are free to set mortgage interest rates on VA loans according to their own policies. Additionally, veteran borrowers are subject to the lender's credit and eligibility standards.To obtain a VA loan, veterans can choose any participating mortgage lender. You or your lender must obtain an eligibility certificate, a document from the VA confirming your service. You then apply for a mortgage loan through the lender's standard application procedure.How Do I Find the Most Affordable VA Loan Rate?While VA loans can be beneficial, they can't do all the work for you. As we've learned, the VA doesn't set the rates on mortgage loans. You will need to perform some diligent legwork and research to find the most affordable rate on a VA loan. Start your search at the local bank or credit union. You may wish to comparison shop by expanding your search to other institutions in your area, or online. Once you locate a mortgage lender offering an affordable VA loan, you can initiate your loan application and certificate of eligibility with them. VA loans are one of the most attractive benefits of military service. If you're a military veteran considering the purchase of a home, finding an affordable rate on a VA loan can help you achieve the dream of homeownership more easily than ever before.
Military veterans looking to purchase a home are probably aware of the loan programs available through the VA. Finding an affordable rate on a VA loan is a little bit easier. However, it's necessary to understand how the programs work and where to look for the best rates.What Are VA Home Loans?At the end of the World War II, the U.S. government sought to help military veterans return to productive life and work at home. Through the Veterans Administration (now known as the U.S. Department of Veterans Affairs), a package of benefits known as the "GI Bill" was introduced to accomplish this goal. One of those benefits was a financial assistance program to help servicemen purchase homes. Nowadays, there are several different VA home loan programs available to qualified military veterans. However, it is important to note that the VA does not guarantee the most affordable rates for home loans.Who Can Apply for VA Loans?As a U.S. military veteran, you are eligible to apply for VA mortgage loans if you meet certain criteria. For military service before Sept. 7, 1980, you must have been on active duty for at least 90 days during wartime, or 181 consecutive days during peacetime. For military service after this date (or Oct. 16, 1981, for officers), the time requirement is two years. Members of the U.S. National Guard and military reservists are eligible after six years of service. If you have separated from service, your discharge cannot be listed as dishonorable. Public health service workers, cadets at service academies and certain other service members are also eligible. Surviving spouses of military veterans who do not remarry may also apply for VA loans.How Do VA Loans Work?Despite the name, VA loans are not really loans made by the government. Rather, the VA insures a portion of a mortgage loan made by an open-market lender. By insuring mortgage loans, the VA provides lenders with greater security and less risk of default. In turn, lenders can offer favorable terms to veteran borrowers. These favorable terms generally consist of zero down payment, no private mortgage insurance (PMI) and reduced closing costs. Because the VA does not make loans directly to veterans, it cannot control the interest rates charged on the mortgages. VA loans are subject to the same market forces as regular mortgages, and lenders are free to set mortgage interest rates on VA loans according to their own policies. Additionally, veteran borrowers are subject to the lender's credit and eligibility standards.To obtain a VA loan, veterans can choose any participating mortgage lender. You or your lender must obtain an eligibility certificate, a document from the VA confirming your service. You then apply for a mortgage loan through the lender's standard application procedure.How Do I Find the Most Affordable VA Loan Rate?While VA loans can be beneficial, they can't do all the work for you. As we've learned, the VA doesn't set the rates on mortgage loans. You will need to perform some diligent legwork and research to find the most affordable rate on a VA loan. Start your search at the local bank or credit union. You may wish to comparison shop by expanding your search to other institutions in your area, or online. Once you locate a mortgage lender offering an affordable VA loan, you can initiate your loan application and certificate of eligibility with them. VA loans are one of the most attractive benefits of military service. If you're a military veteran considering the purchase of a home, finding an affordable rate on a VA loan can help you achieve the dream of homeownership more easily than ever before. |
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