The VA Home Loan Guarantee Program is a tremendous benefit that gives allows qualifying beneficiaries the ability to purchase a home with no down payment and pay no private mortgage insurance (PMI). There are a variety of loan options that offer different VA Loan Rates that should be considered when you using VA Loan Benefits:
30 Year Fixed Rate: The 30 year fixed rate for VA Loans are designed for those that meet Eligibility requirements and want a consistent rate and payment over a long period of time. The largest portion of your total payment (principal & interest) is consistent and this option allows for easy planning of finances. Veterans and Servicemembers that intend on owning or living in a home for a long period of time should consider this option. The negative to the 30 year fixed rate is your interest rate is likely higher than the other options that we will discuss below.
15 Year Fixed Rate: The 15 year fixed rate is similar to the 30 year except for the time horizon. Instead of having a consistent payment over 30 years you will have the same level of consistency except it is over the course of 15 years. The rates offered on a 15 year is lower than a 30 year. Also, because there is less of a time horizon you pay off your home quicker and end up paying less in interest to the bank. The negative is the monthly payment is much larger because you are paying it off quicker.
5/1 ARM: This is a 5 year Adjustable Rate Mortgage (ARM) which gives the lowest rate of the above options and adjusts after 5 years and 1x a year thereafter. It is attractive because the rate is much lower initially but after 5 years moves up or down depending on the interest rate environment. For those that plan owning their home for less than 5 years this is an option to consider. However, you should carefully asses your situation and risk tolerance as this option is less predictable.
Planning your VA Loan rate options start with understanding your financial situation to determine what you can afford. You can start by taking advantage of some VA Loan Tools to better understand what your payment would look like. Also, you should consider important life decisions such as how long you intend on living in the home. These important considerations will help in determining the best option for you.
VA Loan Captain, Inc. is a Service Disabled Veteran Owned Small Business that assists veterans and servicemembers with VA Home Loan Purchase and Refinances. For every loan closed $200 is given to a partner veteran non-profit.