Interest is something that everyone hates to pay but it’s a part of every loan. When buying a home, it’s important to know what interest rate you’ll be paying because it will add to your monthly mortgage amount and you want to get the best interest possible. A common misconception about VA loans is that you are guaranteed a low interest rate. VA loans often times have the same interest rates as conventional loans. So if you go in with the mind state that you’re going to be receiving and incredibly low interest rates, you will no doubt leave significantly disappointed. Let’s look at some facts involved in VA mortgage rates.
How the Interest is Calculated
Just like most loans, your interest rate will be dependent on a variety of factors. The higher risk the borrower is, generally the higher the interest rate will be. A lot of people worry that if their credit isn’t stellar, they will have to pay a much higher interest rate. However, since VA loans are backed by the government, credit is not as big of a factor with VA loans as it is with conventional loans.
If you see ads showing interest rates that are too good to be true, it’s usually because they are. A lot of lenders advertise the lowest possible interest they offer to entice you but keep in mind those interest rates are usually only attainable by people who have extraordinary credit and may have even provided a down payment. Be realistic when looking into VA loan rates.
Locking in Loan Rates
Locking in your VA loan rate has advantages and disadvantages. Some lenders have fees for locking in rates, so try to look for lenders who don’t require these fees. Locking in your rate can be advantageous if you anticipate the market taking a turn for the worst and you want to make sure you have an ideal rate when you buy. However, if the rates go down and you already locked in lower rate, you’ll be paying more on interest than you have to. So be careful when locking in rates, and only do so with proper research on the market.
Rates for VA loans aren’t anything to be intimidated by or scared of. They work just like most other loans in regards to how they’re calculated. You do have the potential to get a lower interest rate than conventional loans due to the fact that your credit score isn’t as big of a factor. We recommend using a VA loan mortgage calculator to help determine what different interest rates will do to your total loan amount and your monthly payments.
How to calculate your VA Loan Mortgage
Before you take out a VA loan, you’ll probably want to know how much you can potentially get. Instead of sitting down with a pencil and paper and doing a bunch of calculations, consider using this handy online VA Mortgage Calculator to save yourself time and a headache.
Simply fill in the blanks to estimate both the amount of your loan as well as your monthly payments. The calculator calculates your property taxes and insurance based on the amount of Principle you enter. Once you’ve entered in all the information, the calculator creates two pie charts to give you a visual of the VA Loan. The first chart displays a breakdown of how each payment is dispersed. Specifically how much goes towards the payment, how much goes towards taxes, and how much goes towards insurance. The second chart shows what percent of your loan will be principle and how much will be interest.
The calculator also features an amortization schedule. This allows you to see how you will progressively pay off the amount of the loan. You can print this schedule out and mark off each payment you make and get that feeling of accomplishment when you reach 0! This calculator will definitely come in handy to give you an estimate of what you can expect from your VA Loan mortgage and it can actually be pretty fun to mess around with the numbers and see what you can come up with.
