2024 is here and many veterans are looking to take advantage of VA home loan benefits in the new year. One common question on the minds of those considering a VA loan is what to expect in terms of interest rates. Here's a comprehensive overview of VA mortgage rates and everything you need to know.
What Determines VA Mortgage Rates?
Like all home loans, interest paid on a VA mortgage is dictated primarily by the bond market. As inflation threatens economic stability, investor demand for safer government-issued bonds increases, lowering yields and subsequently mortgage rates. The Federal Reserve also plays a major role by directly influencing the federal funds rate target range - higher rates aim to cool inflation by making borrowing more expensive overall.
Current VA Rates and Outlook for 2024
As of Now, average 30-year fixed VA mortgage rates hover around 6.5-7%, dropping a full percentage point since peaking earlier this year. Any shifts in inflation, employment, or Fed policy could impact rates going into next year. Of course, economic surprises could alter forecasts. But barring major changes, average 30-year VA loans should remain below 7% throughout 2024.
How Often Do VA Rates Change?
VA interest rates typically fluctuate daily in reaction to bond markets and other macroeconomic indicators. Lenders also have flexibility in setting their own VA rate sheets within established daily “highs and lows.” However, locked rates on approved VA loans remain fixed for a set period - usually between 30-60 days from loan approval and closing. This allows applicants certainty in finalizing terms without the risk of significant rate hikes before funding occurs. Overall volatility will persist, but with leeway in locking rates, veterans can time their VA home loans strategically.
VA Loan Benefits to Leverage in 2024
While rates may remain higher than in recent years, the VA home loan program continues to offer significant benefits that make it an attractive option for eligible borrowers even at these rate levels:
- No Down Payment - The largest benefit is that a VA loan allows qualifying borrowers to purchase a home with no down payment requirement. This removes a major barrier to homeownership for those just entering the market or those needing to relocate.
- Low/No Closing Costs - VA loans typically have lower funding fees and fewer third-party closing costs than conforming loans. In some cases, lenders may offer to pay all or most closing expenses as an incentive.
- Automatic Rate Reduction - If rates drop after closing on a VA loan, borrowers have the option to refinance to a lower rate without fees through the VA Interest Rate Reduction Refinance Loan (IRRRL) program.
Common Questions About VA Mortgage Rates
Some additional key points many veterans ponder include:
- Are VA rates usually lower than conventional loans? Generally yes, due to the lower risk of default and funding fee structure vs PMI. However, the quality of an individual applicant's credit impacts rates significantly too.
- How much can VA funding fees impact rates? While the fee ranges from 0.5-3.6%, adding 1-2% of the loan total rates by just 0.125-0.25%. It's a small tradeoff for no down payment requirements.
- Do I need the best credit for the lowest VA rates? Top-tier credit usually lands the very best offers around 0.125-0.25% lower. But overall VA loans remain accessible with credit scores as low as 500-550.
- Do VA loans require private mortgage insurance (PMI)? Never - the funding fee paid to the VA serves this purpose, making VA loans an excellent PMI-avoidance strategy, especially for those putting less than 10-20% down.
The VA home loan program will remain a go-to option for millions of veterans and service members pursuing homeownership in 2024, as it enables purchasing a property with no down payment required and competitive, low fixed rates.
