VA Loan Rates: Why Do They Change?

1. VA Loan Rates: Why Do They Change? Deciding to buy a home is a huge decision and is confusing with all the terminology that gets thrown around. One option for veterans is to use a lender that offers VA loans. Once you decide that a VA loan is right for you, the next thing to examine is VA loan rates from one lender to another. A lower interest rate on a loan means that you’ll have a lower monthly payment and end up paying much less over the life of the loan. VA Loan Rates What are the Benefits of a VA loan? A VA loan does not require a down payment, unlike other loan programs. Most require at least 20% down to avoid paying private mortgage insurance, while a VA loan you can finance the entire cost of the mortgage. Since VA loans are guaranteed by the government, individuals who get a VA loan and don’t put down at least 20% are exempt from paying for PMI. This also means you’ll have a lower monthly payment than you would with other loan types. Lenders offer VA loans because they are government guaranteed and create less of a risk than other mortgage programs to the lenders. Why and how Often do rates change? VA loan rates are highly regulated, but they’re not fixed and vary depending on how the market performs that day. In the past, the VA set their own lending rates, but that’s not the case any longer. Lenders can charge their own rates to keep the market competitive with other VA lenders and other loan programs. The Government National Mortgage Association (GNMA), commonly referred to as Ginnie Mae, provides liquidity in the market. They do this by purchasing VA loans from the lenders that issue them.

2. Lenders sell the loans to get money to provide more loans to consumers. The GNMA 30- year bond gets traded on the market daily like other securities and bonds that are bought and sold based on investor strategies. Every day lenders look at the Ginnie Mae bond price and change their interest rates to match. The index each lender uses is the same, meaning that rates vary little from one lender to another. Rates from one lender to another aren’t static but don’t expect to see drastic differences when looking at the different loan rates from one bank or credit union to another. Rates can change daily and frequently vary from the morning until the afternoon, especially if something affects the market. Investors put money into the market if they feel confident about how the economy is doing. They’re more likely to invest money in stocks and transfer money from bonds. This causes interest rates to increase, while rates tend to decrease if investors feel that economy is headed downward. Understanding