VA mortgage rates are constantly changing and it can be confusing how VA loan rates can different in depending on the situation. In the video above Jeff from National VA loans talks more about VA mortgage rates in detail.
VA Mortgage Rates Video Transcript
Jeff Newton here from National VA loans today I’m going talk a little bit about VA mortgage rates and how they work. VA mortgage rates are a little bit different than what you might think. A lot of people think there is just a posted rate or they see a rate on T.V. and that’s the rate they’re gonna qualify for. There’s a lot of information that goes into how we qualify a person for mortgage rates.
A couple of those factors, number one would be credit. Obviously credit score makes the difference a person as a 500 credit score is not gonna get the same interest rate of a person that has a 750 credit score. The main reason because obviously the person has a 750 credit score is more apt to pay back their debt. They’ve had a proven track record of paying back debt. So it makes sense because they have established trust and therefore will receive a better VA loan rate.
Whereas a person with a 500 credit score might not have that same kind of track record or in fact does not have that same kind of trust in the eyes of the credit bureau. So mortgage rates are affected by credit score. Another one of the things is loan-to-value. That’s a really big thing that a lot of people don’t think about.
How much is the property value at and how much am I borrowing against it. Let’s just use simple numbers, a hundred thousand dollar home and i’m borrowing a hundred percent. so a hundred thousand dollars you might have estimated your rate to be a little bit higher than what it would be say if you were putting down 20 percent of your own funds. The beauty of the VA loan and why it works out so great for veterans as the benefits are so wonderful is not only can you do the 100 percent financing but you’re gonna get the same or better interest rate on a VA loan than what you would on a conventional loan putting 20% down.
The base rate will be a better rate available to you than what it would being on a conventional mortgage. The reason for that is because the VA backs the mortgage and insures for up to 25% of the value of the property. Which gives the banks the investors the people that hold those funds gives them a little more security which allows them to be able to give a little bit lower interest rate. So all in all it works out is a great benefit to the veterans.
Now let’s talk a little bit about some things that you can look at you know once you once we pinpoint that base rate for you and when we’re doing the pre-qualification and of course you guys can do a pre-qualification at any time at nationalvaloans.com. you guys could go on there and apply now and you’ll do a pre-qualification right there but when you’re doing a pre-qualification we figure out what that base rate is we then can then decide if a potential buy down of the interest rate is worth the money the way we were able to do that is we just take a look at the the base loan amount.
So let’s say a hundred thousand dollars in the scenario that we’re talking about and the base rate once we figure everything up and get to that conclusion and pulling credit and everything we’re at a five percent base rate it’s potential that you can buy down to say a four point seven five percent rate for a half a point or three quarters of a point of interest so let’s just use the half point scenario half point scenario means you’re gonna pay about five hundred dollars in order to get a four point 7.5 VA loan rate.
These are just examples of scenarios and obviously base numbers and real numbers would all come into play whenever we look at this. This is just a good example of how you can buy down that 4.75 versus 5% could save you $50 $60 or $70 a month. And at five hundred dollars if you can save fifty dollars a month it only takes you 10 months to recoup that money.
I wold say that is probably a good value. Now it always doesn’t work out like that and there’s there’s different things that we need to look at obviously cash on hand is important you know it is the seller painting of the closing cost there’s a lot of different factors that we need to look at but it is something to always keep in mind is could I buy my rate down and save myself money the thing that you also want to think about especially on a purchase is if you do use discount points is what it’s called discount to buy the rate down it is tax deductible based on with your tat or with your taxes at the end of the year if you itemize your tax returns.
Now guys by no means am I a tax accountant. Honestly I don’t know a lot about taxes. However I do know that I allow professional people do professional work. So I would contact an accountant in a situation like that. But even your H&R; block or someone like that will know and and help you itemize. So keep that in mind as well, and know that you can buy those rates down and there’s potential for that to be a tax deduction for you at the end of the year.
Again one thing just keep in mind is to come up with a base rate we’re going to be looking at a lot of different factors between LTV credit scores just main things like that debt to income ratio those are gonna be things that are factored in but as a veteran you have the opportunity to take advantage of some of the best rates that are out there without even buying anything now some of the best base rates with the highest loan to values out there.