The cost of buying a home is directly affected by current interest rates. A VA loan rate is as affected by interest rate fluctuations as a conventional mortgage, as your loan is based on the current market rate through a local lender. Coming into April interest rates fell to 3.71% on average, across the country, according to Freddie Mac. Down .30 percent, 30 basis points, since the start of the year, low rates continue driving home sales for the first quarter of the year and fifteen-year mortgages show similar low rates. They and 30-year rates are lower today than they were a year ago.
This is good news for the real estate market nationwide and now is a good time to get a VA loan before rates increase, as they are predicted to do, by the end of the year. VA loan rates are based on current market rates of mortgages. A VA loan rate comes from a local lender, not the government. What it does do for you is give you a loan that is guaranteed, to 90 percent of the loan amount, by the U.S. government in the event that you default on the loan.
What are the rates for 30-year Mortgages?
Conventional 30-year mortgages have a 3.71 percent rate for April, according to the Primary Mortgage Market Survey (PMMS) conducted by Freddie Mac. This is the rate available to ‘prime’ borrowers and requires a .6 discount to be paid at closing. A discount point is a one-time loan cost and is a percentage of your loan amount. For a $100,000 loan, this equates to a fee of $600.
Fortunately, for those who are eligible for a VA loan, there is no PMMS fee but there is a funding fee, which will cost a little more than the PMMS of a conventional loan. The funding fee is 2.15percent of the amount of the loan, for a veteran who is using their eligibility for the first time. This equates to a fee of $3000 on a $100,000 home or $10,425 on the $417,000 that you may borrow with a VA loan. VA loans offer no down payment and private mortgage insurance is not required. The funding fee that is required for a VA loan can be rolled into the loan if you have not met your loan cap.
What are the Forecasted Rates for the rest of 2016?
- April – The predicted minimum interest rate for April is 3.67 percent and the maximum rate is 3.89 percent. The average rate for April is 3.78 percent. Change for April is 1.89 percent.
- May – The predicted minimum interest rate for May is 3.52 percent and the maximum rate is 3.74 percent. The average rate for May is 3.63 percent. Change for May is -3.97 percent.
- June – The predicted minimum interest rate for June is 3.57 percent and the maximum rate is 3.37 percent. The average rate for June is 3.47 percent. Change for June is -4.41 percent.
- July – The predicted minimum interest rate for July is 3.36 percent and the maximum rate is 3.56 percent. The average rate for July is -.29 percent. Change for July is 1.89 percent.
- August – The predicted minimum interest rate for August is 3.51 percent and the maximum rate is 3.73 percent. The average rate for August is 3.62 percent. Change for August is 4.62 percent.
- September – The predicted minimum interest rate for September is 3.58 percent and the maximum rate is 3.80 percent. The average rate for September is 3.69 percent. Change for September is 1.93 percent.
- October – The predicted minimum interest rate for October is 3.56 percent and the maximum rate is 3.78 percent. The average rate for October is 3.67 percent. Change for October is -.54 percent.
- November – The predicted minimum interest rate for November is 3.69 percent and the maximum rate is 3.91 percent. The average rate for November is 3.80 percent. Change for November is 3.54 percent.
- December – The predicted minimum interest rate for December is 3.77 percent and the maximum rate is 4.01 percent. The average rate for December is 3.89 percent. Change for December is 2.37 percent.
Taking the numbers on into 2017, the interest rate projections for the first quarter indicate that rates will remain below four percent, keeping mortgages affordable for those of you eligible for VA loans and VA loan rates.
What does this mean for You?
If you are, eligible for a VA loan, now is a good time to buy and lenders are favorable to those who meet the qualifications, as they see them as a good risk. Based on the current rate trends there will be a continued drop in interest rates until they begin to slowly rise in July. The month of August is projected to see a marked increase but the average rate remains a reasonable 3.62 percent, which is lower than the current April rate of 3.71 percent.
If you are in the market for a single-family home, duplex or multi-family home and qualify for a VA loan rate, you can take advantage the low mortgage rates throughout the remainder of 2016. Talk to your local lender to see if you qualify for a VA loan while rates are low.
2 Point Highlight
The cost of buying a home is directly affected by current interest rates.
A VA loan is as affected by interest rates as a conventional mortgage, as your loan is based on the current market rate through a local lender.
