How are VA loan interest rates determined?

One of the most significant benefits of serving in the United States military is access to home loans guaranteed by the Department of Veterans Affairs. Available only to military personnel, veterans and their eligible surviving spouses, VA loans require no down payment or mortgage insurance and generally have lower interest rates than conventional loans. While the VA sets the overall rules for VA loans, private lenders set the interest rate. Understanding what factors affect VA loan rates will help you choose the lender and mortgage that’s best for you.

Who sets VA home loan interest rates?

Individual lenders set the mortgage rates on VA loans.

Do VA loans have lower rates than conventional mortgages?

VA loans usually have lower rates than conventional loans. When you compare a VA loan to a conventional loan, you'll see that VA home loan rates tend to be 0.25% to 0.42% lower.

VA loan rates are lower because the VA guarantees lenders against losses if the borrower defaults. This reduces the risk lenders take in offering VA loans and allows them to offer lower interest rates.

What are VA mortgage rates today?

The best way to see current VA loan rates is to check with individual lenders. Most will publish their current rates on their website, or you can contact them to ask directly.

To view VA mortgage rates, visit our purchase mortgage rates page or our refinance rates page.

If you’re ready to buy, applying for mortgage preapproval will get you a written offer from a lender that estimates how much you can expect to borrow and the interest rate you’ll pay. Getting preapproval from multiple lenders allows you to compare mortgage offers directly.

What factors affect VA home loan rates?

Overall mortgage rates fluctuate and react to various external factors, such as:

• The state of the economy
• Actions taken by the Federal Reserve
• Investor demand in the bond market

Each borrower’s financial situation also plays a role. While the VA has no minimum credit score, lenders may set their own minimum. They may offer lower rates to borrowers with a higher credit score. The same is true for the debt-to-income ratio. Lenders may set their own DTI ratio requirement.

While VA loans require no down payment, borrowers may get a lower rate if they can afford one. There also can be pricing adjustments based on the loan amount itself.

VA home loan vs. conventional 30-year fixed mortgage rates

The 30-year fixed-rate mortgage is the most popular home loan in the United States.

Individual lenders set the interest rates they charge borrowers for this loan type, whether it’s a conventional loan or a VA loan. That includes market conditions and the borrower’s finances.

Rates on VA loans are usually lower than those for conventional loans because they are guaranteed by the government. Conventional loans are not. This means that if a VA loan borrower defaults on their loan, the VA is guaranteed to compensate the lender for a portion of its losses. This makes VA loans less risky for lenders, allowing them to offer lower interest rates on those loans.

Who can get a VA loan?

Unlike conventional mortgages, not everyone is eligible for a VA loan. Only qualified veterans, active-duty military personnel, current and former National Guard and Reserve members and their surviving spouses are eligible.

To get a VA loan, you’ll need a Certificate of Eligibility (COE), which verifies that your military service qualifies you for VA benefits. You can request a COE from the VA online or by mail.

Property requirements for a VA loan

The property you’re buying must meet VA standards that ensure it’s safe to live in. These requirements include: 

• All mechanical systems are safe and in good condition.
• The property has functioning heat.
• The roof is in good repair.
• Basements and crawl spaces are dry.
• It’s free of termite infestations.
• Any lead-based paint has been removed or covered and painted over if it cannot be removed.
• The home is free of mold, mildew, rot, and other structural defects.

The home you purchase with a VA mortgage must also be your primary residence. VA loans cannot be used to buy vacation homes or rental properties.

Pros and cons of VA loans

VA loans come with myriad advantages to eligible borrowers, but they’re not without their downsides.

Pros

• Low interest rates: VA loans often offer lower rates than conventional mortgages.
• Accessible requirements: Underwriting and credit prerequisites are more flexible and easier to meet.
• No down payment needed: VA loans allow eligible borrowers to purchase homes with no money down.
• No insurance required: You don’t need to pay mortgage insurance.
• Refinancing option: Eligible homeowners can refinance a conventional mortgage into a VA loan for a lower interest rate.

Cons

• Not everyone can get one: VA loans are only available to qualified veterans, active-duty military personnel, current and former National Guard and Reserve members, and their surviving spouses.
• Only for primary residences: VA home loans cannot be used to buy second homes or investment properties.
• Must pay closing costs: Borrowers must pay closing costs on the loan based on the loan amount and their down payment. Closing costs typically total 3% to 6% of the loan amount.
• Must pay a funding fee: Borrowers are required to pay the VA funding fee and other costs.
• Not offered by all lenders: Borrowers will need to find a lender that offers VA loans.

FAQs about VA mortgage rates

Here are answers to common questions about VA mortgage rates.

Can I lower my interest rate by refinancing my VA loan?

A VA Streamline refinance – also called an IRRRL, or interest rate reduction refinance loan – is a simple refinance loan that allows VA loan borrowers to replace their home loan with a new one, often with a lower interest rate or more favorable terms. This type of veteran home loan refinancing is called a Streamline refinance because it requires less paperwork than a traditional refinance loan.

Does my lender set my VA mortgage rate?

Yes, mortgage lenders set their own rates for VA loans.

How can I get the best VA loan interest rates?

The bottom line: VA loans come with lower mortgage rates

VA loans help military personnel, veterans and their spouses buy a home. They come with some downsides, but those are offset by perks, including no required down payment and lower mortgage rates than conventional mortgages.

If you’re eligible for a VA loan, start an application today to see your rate.