Because VA home loans are backed by the federal government, many lenders have the luxury of charging competitively low interest rates. Veterans and service members find that rates are generally lower with a VA home loan than a conventional mortgage.
The VA doesn’t set interest rates. The lender determines the rate on your VA loan based on your unique financial situation.
What Factors Determines My Rate?
VA loan interest rates are influenced by a variety of factors, including:
1-Credit score
2-Debt-to-income ratio
3-Loan duration (15- or 30-year)
4-Current market conditions.
VA Loans and APR
It is important to understand the difference between your interest rate and Annual Percentage Rate (APR). The interest rate on your VA loan is the cost you pay each year to borrow the money and does not reflect fees and charges you may incur to get the loan.
On the other hand, the APR on a VA loan is a broader reflection of actual borrowing costs, including the interest rate and other potential costs and fees associated with getting the loan.
APR can take into consideration the following items:
1-Interest rate
2-Origination fees and costs
3-Closing agent fees
4-Discount points if any
5-Other fees dependent on the specific transaction
Your APR is likely to be higher than your base VA loan interest rate. APR is a tool that can help you compare mortgage offers.
But understand that lenders can calculate it differently.