The VA loan program provides eligible veterans and families with loans at favorable terms for buying a home or condominium or making improvements to adapt the house for disabled residents. The VA's Interest Rate Reduction Refinance Loan (IRRRL) is a streamline loan to refinance unfavorable mortgages for qualified veteran homeowners. Lenders that make VA loans are required to meet government requirements, but their flexibility in setting rates makes comparison shopping worthwhile.
Evaluating Offers from VA Lenders
First off, be sure to work only with a VA-approved mortgage lender – and you want live quotes. VA lenders know the ins and outs of working for VA loan approvals. Consumers can conduct online research for customer reviews recorded about the lender or the individual loan officer that makes initial contact or closes the loan. The Better Business Bureau is another place to look for lender red flags.
When they receive loan offers, vets should examine each one carefully for qualification requirements that may exceed VA stipulations. For example, a lender may establish a minimum qualifying credit score in excess of the commonly accepted 620 – 660 VA score, knocking the borrower out of the game. Or, others may "reward" vets with higher credit scores with more-favorable rates. Remember: the VA does not set interest rates; it guarantees a portion of the loan.
Look through the offer for all points and VA fees. For those seeking VA Hybrid Adjustable-Rate Mortgages, pay close attention to the lock-in periods on the fixed part of the loan. The highest the VA ARM rate can increase on the first adjustment is one percent, and climb no more than one percent each successive year.
To get lower interest, VA lenders may allow buyers to "buy down" the rate by making a down payment. At the same time, it may not be prudent to pay more up front if the owner intends to remain in the house for many years. One of the key benefits of VA loans is that they don't require down payments!
Why Comparing VA Lenders Makes Sense
Lending is a business. When comparing VA mortgage rates, gathering multiple offers can save consumers thousands of dollars on their loan, according to 2012 Stanford University study. For those who prefer, seeking written mortgage quotes by telephone can help vets build a range of choices. A quicker way to get a rate in writing and lock it in for the loan is to use LendingTree's VA Loan Explorer to round up multiple offers. National lenders may offer lower rates online than they do through brick-and-mortar offices.
It's important to get quotes for the same type of VA loan product. For instance, don't seek a 25 year fixed-rate loan offer from one lender and one for a 30-year ARM from another mortgage company. To get an idea of current rates without commitment, consumers can use LendingTree's customized loan search tool to refine search options down to the purpose of the loan, the property value, zip-code location, and estimated credit score.
Final Note: It's probably a good to time evaluate some commonly committed VA application blunders that can blow up the guaranteed loan process or slow it dramatically.