It can be a little frustrating at times, especially for those hoping to qualify for a VA home loan or someone currently with a VA home loan who is considering refinancing their existing home loan. But VA rates, as with all mortgage rates change. VA mortgage rates can change daily or even during the course of a business day during volatile times. Who sets VA rates and how can they change so often?
It used to be that the VA set interest rates as well as oversee other aspects of the loan approval process. When a VA lender would process and approve a loan, it was the VA who set the rate, not the individual lender. No longer. Today, VA lenders set their interest rates and they can all be different from one another. Not by much, but different nonetheless.
Each day as a VA lender opens its doors, a division of the lender establishes interest rates the loan officers will use that day. This department will publish rates for 30 year, 25, 20 15 and 10 year fixed rate loans, all with various rate and point combinations. The lender sets the rate based upon each programs’ individual index. For VA loans, this index is the GNMA30yr3.0 for a 30 year mortgage or the GNMA15yr 3.5 coupon for a 15 year.
There’s not a need to explain what these acronyms are, only to understand that the coupons, or mortgage backed securities are bought and sold throughout the day by investors. As the demand for a particular security increases, the price goes up. When prices go up, mortgage rates are forced down. This trading dynamic is the cause for mortgage rate swings on a daily or even intra-day basis.
All VA lenders price their loans on the very same set of indices. That’s why one lender can’t have a 30 year fixed rate at 3.00 percent while every other lender is at 4.00 percent for the very same loan program. VA lenders can be different with their rates, but not by very much.