VA mortgage rates are always changing, but so are other mortgage rates. It’s the trend in the housing and financial markets. Depending on the economy and many other factors, rates go up or down, and someone always wins because of it. When rates rise, lenders get more money from buyers who buy a new home. When rates fall, sellers and buyers win because buyers are saving money and want to buy more houses on the market. Even when things aren’t looking good for you, someone appreciates where rates are. Since VA loans are guaranteed by the United States Department of Veterans Affairs, many people look to the VA mortgage rates to see what they can get.
VA mortgage rates might not apply to you if you are not or were not in the military. However, those who were or still are in the military get to take advantage of this powerful lending tool. The benefits far outweigh those of most other mortgages, but there are still a few things you must learn about VA loans and VA mortgage rates and trends that surround them before you apply.
How VA Mortgages Work
VA mortgage rates don’t matter if you’re not able to qualify for a VA loan. Here’s how these loans work, and here is what you need to do to qualify for a VA loan with which to buy your new home.
Pre-Approval Is Necessary
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If you are in the military or you were in the military, it’s time to get qualified for a loan. First, you need to choose a lender who offers VA loans at competitive rates. If you are unsure where to look, you can check with your local Veteran’s Affairs office for advice, or you can ask your local bank or credit union. A quick internet search can also provide you with a long list of VA lenders in your area.
Once you have some lenders in mind, check their rates and apply for a loan. You’ll need to do this before you shop for a home so the lender can verify your income, credit history, and financial health to determine how much you can afford to spend on a new home. Once your pre-qualification is approved, you’ll know what you can shop for in terms of budget.
Understand the Parameters
You cannot buy anything you want with a VA loan. Unfortunately, you’re not going to get that major fixer-upper, investment property, business property, or agricultural land you’ve been eyeing. You’re getting a home that is designated as move-in ready. It might be a fixer-upper to you if you don’t like the style of the home, but you’re not getting anything that isn’t immediately inhabitable.
You cannot buy a second home, vacation home, or investment property with this kind of loan. You can use this loan to buy your primary residence only. You can, however, use it to buy a multi-family unit if you live in one of the units full-time. Every lender has its own rules for occupancy, so you will need to check that out if you have a unique situation of your own. For example, if you live or work outside the country but your family lives full-time in the states because you have kids in school, you may qualify as an exception to the rule.
You Don’t Need A Down Payment
Since VA mortgages are backed by the United States government, there are some benefits you can use to your advantage. One such benefit is the fact that you do not need a down payment to finance a home with a VA loan. You will not pay private mortgage insurance (PMI) either, even if you finance 100 percent of the home you purchase.
VA Underwriting Processes
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The way a VA loan works is similar to any other mortgage. However, there are just a few additional parameters because of the loan type. The underwriting process is strict. There is a significant amount of paperwork and evaluation needed to finalize a loan of this nature, and it may take longer to fund a loan like this than another type of loan.
VA Mortgage Rates Trend
The VA mortgage rates trend at the moment is a positive one for buyers. If you are in the market to obtain a VA loan with which to buy a home, now is the time to do it. The market has been saturated with higher rates the past few years. However, rates are dropping as of 2018, and they are lower than they’ve been in a while as of December 2018. In financial terms, VA mortgage rates are down 10 basis points. That’s .10 percent lower than rates at the beginning of the year.
That’s not to say that every rate is higher or lower than the competition, but it is an average. At the moment, average rates are under 5 percent. It’s not difficult to find rates in the 4.7 percent range right now. That’s not the lowest rate you’ll find, but you will find that it’s lower than many other traditional mortgage rates. In fact, some VA mortgage rates are anywhere from 10 to 25 basis points lower than a conventional mortgage rate at the moment.
Why Are Low Rates Trending Right Now?
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At the moment, rates are a little lower because of global uncertainty. While the United States is currently in an upward trend economically speaking, the rest of the world is not. There are many factors that are considered when the Federal Reserve changes rates, and one of those factors is global uncertainty. Other countries are connected to the U.S. in various ways, and their troubles do have some effect on the U.S. economy.
China’s trade war is keeping rates low at the moment. Brexit is another issue that is driving rates down in the U.S. as Britain is working to get the country together while also still working with the rest of the world. The Dow has dropped more than 500 points more than 10 times in 2018, which is helping to keep rates lower than usual. Finally, the falling oil prices are also helping rates because it’s driving down costs in many industries.
VA Mortgage Rates Future Outlook
VA mortgage rates might be lower than usual right now, but the future outlook and trends are projecting the rates to rise slightly. Industry experts are predicting rates will rise to above 5 percent in the new year. Part of the reason for this is the great economy in the United States. When the economy is faltering, lenders offer lower rates to buyers to keep their business up. When the economy is thriving as it is right now, rates will rise.
How Is the Economy Good Right Now?
Right now, the U.S. economy is thriving. The unemployment rate sits at 3.7 percent. In laymen’s terms, this means there are currently more jobs available than there are people in need of employment. This is the lowest the unemployment rate has been in five decades, which is a long time.
A Gradual Increase in VA Mortgage Rates
It’s not just VA mortgage rates that will rise in the new year. It’s all rates, but the rise will be a gradual one. It will not jump a percent here or there. It’s only set to rise slightly, which means it’s still very much a buyer’s market for anyone looking to secure a mortgage with a lower rate. However, you can lock in a lower rate right now by submitting an application for a loan before rates begin to rise.
Considerations For VA Mortgage Rates
The VA mortgage rate trends don’t matter as much if your credit is not excellent. The only people getting the lowest rates offered by any lender are those with the best credit scores. If your credit is good or even fair, you’re going to pay a much higher price for a loan even if it is a VA loan. The best way to ensure you’re getting the best rate for a new home is to fix your credit before you apply for a loan. Report and dispute any mistakes or inaccuracies to help your score. Start paying your bills on time, pay off your debts, and see if you can increase your income.
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VA loans are powerful tools for anyone who wants to buy a new home without making a down payment. This kind of loan is the type that allows buyers to realize the American dream of owning a home, but it doesn’t require you spend years saving money to put down. It also means you don’t have to pay up to one percent of the value of your home in private mortgage insurance rates because you didn’t provide a down payment. It’s an affordable way to buy a home, even when the rates rise just a bit. You can save money if you buy when the rates are low, but you can still save money by using a VA loan if you qualify even when rates trend upwards.
Featured Image: Image by Nattanan Kanchanaprat from Pixabay
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