A Beginner’s Guide to VA Loans
Last updated on August 11, 2023
Written by
Senior Writer/Spokesperson
Reviewed by
Written by
Senior Writer/Spokesperson
Reviewed by
How do I find current VA mortgage rates?
NerdWallet’s mortgage rate tool can help you find competitive, customized VA mortgage rates. In the “Refine results” section, enter a few details, and in moments you’ll get a rate quote tailored to meet your needs, without having to provide any personal information. From there, you can start the process of getting approved for your VA home loan. It’s that easy.
How are veterans navigating the market in 2024?
Veterans United, a lender that specializes in VA loans, surveyed borrowers between August and September 2023 who intended to purchase a home within the next three years. Of these borrowers, 27% reported that they anticipated buying within the following six months, while 40% projected that they’d be buying within seven to 12 months. As such, more VA borrowers might start to trickle into the market throughout the year.
It also seems borrowers are waiting for mortgage rates to fall in 2024. More than three-quarters (78%) of respondents reported that an “acceptable” mortgage rate would be 5% or less. Respondents also reported that their three largest barriers to homeownership were high interest rates, high home prices and the costs of other goods and services.
Who is eligible for a VA loan?
Active-duty service members who served 90 continuous days.
Veterans who have met length-of-service requirements (generally 90 days in wartime and 181 days in peacetime).
Service members or veterans who have completed 90 days of active-duty service or six creditable years in the Selected Reserve or National Guard.
Surviving spouses of veterans who died while in service, died from a service-connected disability, went missing in action or were a prisoner of war. Surviving spouses who have remarried are only eligible if the marriage was after age 57 or after Dec. 16, 2003.
Select members of other organizations may also be eligible, such as Public Health Service Officers or Officers of the National Oceanic & Atmospheric Administration.
What determines my VA loan interest rate?
Many factors influence the mortgage rate you’re offered, including the economy, your financial details and the lender. The best way to find out if you’re being quoted a good VA mortgage rate is to apply with multiple lenders. When you make lenders compete, you can compare loan offers and determine which has the best combination of rate and fees.
With a Loan Estimate from each lender compared side-by-side, you’ll be able to see which lender is giving you a good mortgage rate combined with the lowest origination fees.
Personal details that will influence your rate offers include your:
Credit score: Generally speaking, higher scores come with lower rates.
Existing debt: Ideally, your total amount of monthly debt obligations (including your mortgage and other loans) shouldn’t account for more than 41% of your monthly pre-tax income.
Loan term: While shorter mortgage terms will have a higher monthly payment (say, a 15-year loan vs. a 30-year loan), they also come with lower rates.
Down payment: While this isn’t required for a VA loan, a down payment will lower your loan-to-value ratio, which can result in a lower rate.
Are VA rates lower than conventional?
On average, VA home loans tend to have better mortgage rates than conventional loans. The rate you’re offered will depend on your credit score and other personal financial details, as well as the lender.
» MORE: See VA loans vs. conventional loans
Will VA loan rates go up or down?
Average mortgage rates fluctuate daily and are influenced by the economy’s overall rate of growth, the inflation rate and the health of the job market. Unpredictable events can affect all of those factors. See NerdWallet’s mortgage interest rates forecast to get our take.
How much does a VA loan cost?
Your VA mortgage rate will affect the overall cost of borrowing. A higher rate will mean a higher monthly mortgage payment and more interest paid over the life of the loan.
VA loans include other costs, too. Most borrowers will pay a VA funding fee. The fee varies depending on several factors, including whether the loan is for a home purchase or mortgage refinance, the down payment amount and whether this is your first VA loan.
For purchase loans with a zero-down payment, the VA funding fee is 2.15% of the loan amount if this is your first VA loan and you close the loan on or after April 7, 2023. It can be lower for some refinances and can be waived for disabled veterans and some surviving spouses. Active-duty service members who have received a Purple Heart are exempt from the funding fee. You’ll also be responsible for other closing costs, such as appraisals and inspections.
What’s the difference between a VA interest rate and APR?
The interest rate is the percentage that the lender charges for borrowing the money. The APR, or annual percentage rate, can reflect a more accurate cost of borrowing. The APR calculation includes fees and discount points, along with the interest rate.
APR is a tool used to compare loan offers, even if they have different interest rates, fees and discount points.
Pros and cons of VA loans
VA loans are often a good deal for borrowers who qualify — especially if they want to buy without making a down payment. Here are some benefits and one drawback to VA loans:
Pros
Buy with zero down: Qualified VA borrowers may buy without making a down payment.
No mortgage insurance: Even with a 0% down payment, VA borrowers don’t pay mortgage insurance. Instead, they pay a one-time funding fee.
Lenient loan qualifying standards: The VA has no minimum credit score requirement, although lenders often require credit scores of 620 or higher. When assessing affordability, the VA looks at how much money is left over after the borrower’s monthly expenses.
Cons
Funding fee: Although VA loans don’t have mortgage insurance, they do have a funding fee that’s paid at closing. The funding fee varies from 1.25% to 3.3%, depending on size of down payment and whether it’s your first or a subsequent VA loan.
» MORE: Get your credit score for free
» MORE: What is APR and how does it affect your mortgage?
Learn more about VA loans:
FHA vs. VA Loan: Which One Is Right For You?
VA loan calculator
Best VA mortgage lenders
About the author: Holden is NerdWallet's authority on mortgages and real estate. He has reported on mortgages since 2001, winning multiple awards.
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