Military families who wonder whether they’re getting a fair interest rate with their VA loan should know this – VA borrowers have an interest rate advantage over conventional borrowers.
The VA requires no minimum credit score for loan qualifying. VA-approved lenders are allowed the flexibility to decide whether a borrower is a safe credit risk. Many VA lenders enforce their own minimum credit score requirements for VA loan qualifying. But, typically the same low interest rate is offered to most approved veterans regardless of score.
In conventional lending, the best interest rates are reserved for “star” borrowers with high credit scores and sizable down payments.
The VA guarantee gives lenders the security to offer veterans better terms than conventional borrowers.
The VA borrower can save thousands of dollars over time with a lower interest rate. For example, the monthly savings with just a half a point interest rate reduction on a $250,000 would be $77. That’s $924 saved annually and $27,000 over 30 years.
With a lower monthly payment, qualified VA borrowers may be able to purchase a more expensive home for the same monthly payment than a conventional borrower would pay with a higher interest rate on a cheaper home.
Other advantages for VA borrowers include:
- Zero Down Payment up to Conforming Loan Limits
- Up to 100% LTV on VA Refinancing
- No Private Mortgage Insurance (PMI)
- No Pre-payment Penalties
- Relaxed and Straight-forward Qualifying
VA borrowers are allowed to pay interest rate reduction points to receive an even lower interest rate. Because the VA program doesn’t have interest rate and down payment penalties due to credit score, many of VA-eligible borrowers find they get a more favorable loan.
For more information about VA loans contact a VA home loan professional.