VA Loan Rates

VA Mortgage Rates…for those searching for a VA Loan in California, it’s the first thing most people ask:  What’s my rate?  For those who qualify—all things equal—VA loan rates will usually be lower than other options, either Conventional or FHA.  Great news, if you’re eligible.

There are several articles on our site that talk about how the VA Loan works, but the basics are as follows:

A little background:

The VA does not actually lend the money to you directly. They offer a guaranty (25% of the loan amount) to a lender that if you should default on the loan, they will pay the lender a percentage of the loan balance.  Think of it like an insurance policy you pay on your car:  When you get into an accident the insurance company reimburses you for fixing the car.  With the VA guaranty, instead of paying you, the insurance pays the lender.

In other words, there’s less risk to the lender that they will lose money when lending on a VA loan, meaning they don’t have to charge the same interest rate as on other loans—VA Loan Rates end up being lower than on other loans.  And that’s great for you if you’re eligible for a California VA Loan.

CLICK HERE for today’s California VA Loan Rates

Conventional loans don’t work the same way—necessarily (although, if you purchase with less than 20% down on conventional financing, you’ll pay monthly mortgage insurance—PMI—that also insures the lender).  This also minimizes the risk to the lender, but for the borrower, now you’re paying an additional fee each month.  The VA borrower doesn’t pay that monthly fee.  Right out of the gate (without taking into account the interest rate), the VA borrower’s monthly payment is lower because, even though a California VA Borrower can put down less than 20%, there’s no additional monthly fee.

 

FHA loans require a down payment, and you must pay monthly mortgage insurance.  Unlike Conventional loans, no matter how much you put down—even if it’s 20%--you still pay monthly mortgage insurance.  There’s reasons someone might do this, but if you’re eligible for the VA Loan, there’s no reason.  VA Loans are better.

How Do VA Rates Compare?

CLICK HERE for today’s California VA Loan Rates

It’s the big question.

Remember, for the best rates, Conventional loans require a 20% down payment for the best rate, and a FICO score of 740+;  FHA loans require a 3.5% down payment and a FICO score of 720+.  VA loans require 0 down payment.

On the date compared, here’s how the rates stacked up with 0 points and excellent credit*

Rate

Down Payment

Monthly MI

Conventional

3.625%

20%

No

FHA

3.250%

3.5%

Yes

VA

3.250%

0%

No

*comparison only; not current rates; based on purchase loans; refinance rates can be different

Shopping for VA Mortgage Rates:

Shopping for the lowest VA Mortgage Rates can be challenging, and maybe just a little confusing.  The reality is that the rates that a loan company advertises are really only good for that date and time that’s quoted.  The challenge with getting the advertised rates is two-fold:

1.  Loan Rates* (for VA Loans, Conventional Loans & FHA Loans) are determined in the mortgage bond markets (similar to the stock market) and are based on what bond buyers’ are willing to pay for a particular mortgage bond at that point in time.  Some days, the bond price stays fairly stable and prices/rates stay the same.  Other days, the prices may change multiple times in a day, creating a real problem in trying to compare rates.

Imagine you got a quote from one VA Lender on Monday; another on Tuesday; a third on Wednesday.  The markets would have moved between those days and the pricing would be different between the Lenders.  In fact, if you got a quote from the same California VA Lender on three separate days, the rate could be different each day.  Sure makes comparing a challenge.

2.  The “Perfect Borrower”.  Advertised rates are based on the perfect borrower fitting into the perfect “box”:  Those with super-excellent credit with down payments, purchasing a single-family home (no duplexes/condos, etc).  So, if your situation has you with anything that falls outside the “perfect box”, your rate would most likely be different than advertised.

 No matter how you slice it, though—and we have clients that use all of the loans we’ve discussed here—the VA Loan usually works out the best for California Veterans.  Because we have expertise in loan types in addition to the VA Loan, we can run comparisons for you.  The bottom line being, you should feel comfortable with the loan you get for your home.  If we run the options, and you qualify for, and want, a different loan program, it’s your choice.  At the end of the day, you deserve to be happy with your loan.  And the California VA Loan is a fantastic option.

If you want to discuss your options, or have more questions, just contact us by one of the means on the website.  We really want to help.

*The interest rate on the bond moves opposite from the bond price, meaning when bond prices increase, interest rates decrease, and vice-versa.  And Bond prices—in general—move opposite that of the stock market, so generally, when the stock market increases, so do rates; the stock market decreases, so do rates.  When it comes to locking/choosing a rate, you want to cheer for the stock market to be declining…opposite of what you might think.


*https://www.apmortgage.com/disclosures

California's VA
Home Loan Specialist

Andrew is a Senior Mortgage Banker with years of experience with residential home mortgages. Andrew is proud to specialize in VA Home Loans to help active-duty and retired military personnel realize the dream of home ownership. Andrew and his team are also skilled in Conventional and FHA financing to help homeowners decide on the loan program that suits their needs.

Andrew Vierra
NMLS #230799
Branch Manager
(916) 932-7160
Licensed in CA

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