VA Loan Rates for December 28, 2020

VA Loan Rates for December 28, 2020

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Current VA Mortgage Rate

Current VA rates average 3.67% nationally, and have changed by 1.32% over the past twelve months. This is not an APR and does not factor in any closing costs or fees.

Current VA Loan Rates Online

The key advantage of VA loans is how much it reduces your upfront costs, not just how much you save on interest. The monthly payments estimated above assume a down payment of 5%, but in many cases you may be eligible for VA financing that requires no down payment at all. However, only qualifying members of the armed forces and their family may apply for a VA loan. If you aren’t an eligible VA applicant, you could also consider an FHA loan, which offers comparable terms.

While VA loans offer a drastic reduction in the required down payment on a house, applicants are still responsible for paying a VA funding fee to cover the cost of the Veterans Administration’s mortgage guarantee program. Making a down payment can lower the VA funding fee, so be sure to check out your options, and make sure that you’ve accounted for such extra costs before choosing a mortgage lender based on a low-rate offer alone.

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VA Mortgage Rate Forecast: Rate Dip, Stricter Approvals and Larger Loans

Recent mortgage rates have dipped overall, with VA loan rates declining alongside conventional mortgage rates. At the same time, the rate of approvals on VA loans has also dipped correspondingly, potentially due to stricter underwriting standards. VA rates continue to price consistently lower than conventional mortgage loans.

Mortgage rates fell to historically low levels in 2008, thanks to stimulative efforts from the Federal Reserve. After a brief period of rising rates in 2018, interest rates have declined again in mid-2019, with mortgage rates following closely. VA loans have cheapened as a result and borrowers may find this an optimal time to obtain or refinance into a VA loan. It’s unclear how long this temporary period of low rates may last, so it may be worth exploring your loan options sooner rather than later.

Read about:   2020 Conforming Loan Limits for all the Counties in California (CA)

Recent VA Loan Rates

Avg VA Loan Rate Avg 30-Yr Mortgage Rate Difference
November 2019 3.67% 4.04% -0.37%
3.68% 3.94% -0.26%
September 2019 3.69% 3.93% -0.24%
August 2019 3.82% 4.07% -0.25%
July 2019 3.96% 4.20% -0.24%
June 2019 4.20% 4.41% -0.21%
May 2019 4.31% 4.52% -0.21%
April 2019 4.41% 4.62% -0.21%
March 2019 4.56% 4.79% -0.23%
February 2019 4.66% 4.88% -0.22%
January 2019 4.83% 5.04% -0.21%
December 2018 5.01% 5.19% -0.18%
November 2018 4.99% 5.17% -0.18%
October 2018 4.83% 5.03% -0.20%

In 2018, VA loan rates priced around 18 – 20 basis points lower than conventional mortgage rates on average. The most recent data show that this spread widened somewhat in early 2019, with VA loan rates pricing as much as 0.23% lower than comparable conventional loans in March. Low rates aren’t the main advantage of the VA loan program—that would be the low down payment option—but for now, the best VA lenders continue to offer slightly better rates on VA loans than other mortgage options.

VA Loan Approval Rates Improved

On the other hand, it’s become easier to secure approval for a VA loan than in previous years. The average closing rate of VA loan applications has gone up to 73% this year, up from 56% in 2014, and as low as 65% in 2018.

Graph of VA loan closing rates from 2014 to 2018

VA purchase applications consistently see higher rates of approval than refinance applications: three out of four purchase loans make it to closing, while only around 66% of VA refinances are able to close. In fact, VA loan refinance applications experienced a lower rate of approval than refinance applications for other kinds of home loans with the exception of FHA loans. Overall, the data suggests that you’re more likely to get approved for a VA purchase loan than for a standard mortgage, but less likely to get approval for VA refinancing compared to a regular refinance.

At the same time, the typical FICO credit score of successful VA applicants remains around 708 with average debt-to-income ratios (DTI) and LTV ratios remaining consistent as well. These statistics indicate little change in the qualifications of applicants who were able to obtain VA home loans in terms of credit and debt levels. These traits apply to both purchases and refinances.

Average VA Loan Amounts Grew

The typical VA loan seems to continue to be obtained in larger dollar amounts. This is likely indicative of rising home prices in general. However, the median price of houses purchased with VA funding has mostly stayed below the median price of homes bought with other mortgage types.

Graph of median sales prices for VA-financed home purchases and all new home purchases from 2008 to 2017

In October 2017—the latest available data point—the median sales price of a home bought with a VA loan was $306,000. Although this number was substantially lower than the overall median sales price of $328,600 in that same period, it remains higher than typical property values in many parts of the U.S. This means that the VA loan continues to be a reasonable option for veterans and servicemembers regardless of where they’re looking to purchase a house.

However, rising VA loan amounts are also partly due to the aggressive increase of home prices in many of the more expensive U.S. markets today. It costs homebuyers more to obtain the same quality and square footage in a house than it would have a few years ago. While this means that the relative purchasing power of VA loans hasn’t increased all that much, the benefit of having no down payment is still a major financial advantage to veterans and servicemembers.

Interest Rates at Top-Rated VA Lenders

The VA loan application involves a number of elements that aren’t required in a standard conventional mortgage, which makes it important to find lenders who specialize in handling VA loans and prioritizing customer satisfaction. If you prefer to start your VA loan search based on the quality of service provided rather than the cheapest rates, consider checking out the lenders below.

Best VA Lenders by Customer Satisfaction

2017 J.D. Power Rating 30-Year VA Loan Rate
Veterans United 889 3.5%
USAA 859 3.375%
Navy Federal Credit Union 829 3.0%
Pentagon Federal Credit Union 3.5%

The lender ratings provided by the J.D. Power Primary Mortgage Origination Satisfaction Study are based on customer responses about factors like the application process, product choices, and loan closing. How different lenders handle application requirements, what special options they offer, and how long the funding process takes are questions that often get overlooked in favor of comparing interest rates and APRs. It helps to bear these issues in mind when speaking with a loan officer for the first time.

The mortgage rates above may change on a regular basis and rely on specific assumptions about the number of discount points or origination fees paid on the VA loan. However, each of these lenders has an established reputation for delivering above-average customer service in a crowded industry. Aside from Veterans United, all of these lenders also offer other products such as checking accounts and credit cards, making them a convenient all-in-one financial solution for veterans or active-duty families.