VA LOAN CAPTAIN BLOG & Learning Center

Timing is Everything

By: Grant Moon 12/12/13 11:25 am

Timing is Everything

You can spend hours on the internet getting a handle on what the markets are doing today and what might happen tomorrow. There’s no shortage of economic and political prognosticators who regularly rub their crystal ball to prove how smart they are. Or aren’t. The reality is there will typically be just as many who are right as those who are wrong. But that’s really not what you want to hear, is it? You want to know if you should take today’s VA mortgage rate or wait a few more days to see if the rates will drop further. Here’s a suggestion on how to approach that dilemma.

The VA mortgage rate market is dynamic. It changes and you’re subject to whatever the rates are for that day. And because VA lenders set their interest rates on the very same set of indexes, you won’t find one VA lender with wildly lower rates than anyone else; at least under the very same terms. So if you’re deciding whether or not to lock in your rate, pretend that whatever you decide will be wrong.

Say that market rates today are 4.25 percent and you can lock that in today. On a $200,000 30 year VA loan, the principal and interest payment is $983. So you decide to lock that in. You do, but rates fall to 4.125 percent three days later. You were wrong. But not by much as the lower rate only drops a payment to $969, or $14.

Now say you decided to wait and again you were wrong and rates go up to 4.50 percent and keep going. What if rates top 5.00 percent? Now you get a feel for the strategy. If your loan is approved and market rates are what they are, go ahead and take today’s rate. After all, which way would you rather be wrong?


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