Mortgage Rates Push VA Loans To 21-Year High
The VA mortgage program is increasing in popularity.
In the Department of Veterans Affairs 2015 fiscal year, ultra-low VA mortgage rates combined with the program’s common-sense underwriting to push VA mortgage lending to levels not seen since 1994.
The VA guaranteed more than 631,000 home loans in the most recent fiscal year, a 19 percent surge from the year prior.
Furthermore, use of the VA’s in-house refinance program — a speedy program known as the VA Streamline Refinance — more than doubled over the same period of time.
Today’s military borrowers are taking advantage of the VA Home Loan Guaranty program for what it is — a cost-effective, sound way to purchase or refinance a home.
And, with current mortgage rates low, it’s an excellent time to consider your VA mortgage eligibility.
VA Loans : 100% Financing, No Mortgage Insurance
VA loans are loans guaranteed by the Department of Veterans Affairs, and made possible via the G.I. Bill of 1944.
The program, for which the official name is the VA Home Loan Guaranty program, can be used by veterans of the Armed Services and National Guard and Reserves, and active-duty members of the U.S. military.
Structurally, the VA loan is similar to other loan types such as the FHA loan, conventional loan, and USDA loan. You borrow money from the bank to purchase or refinance a home, and then you make monthly mortgage payments until the borrowed amount has been satisfied.
However, because of how the Department of Veterans Affairs supports its flagship home loan program, borrowers using VA mortgages benefit in ways that other borrowers using other program don’t.
As one example, VA loans are “no money down” mortgages, which means that you can buy a home using a VA loan without having to make a down payment.
FHA loans and conventional mortgages require 3.5 percent and three percent down payments, respectively, at minimum.
As another borrower benefit, VA loans never require mortgage insurance.
No matter how large or how small your down payment, when you’re using a VA loan, mortgage insurance is waived. There is no other government-backed program which will allow the same.
And, VA mortgage rates tend to be lower than rates for other common loan types.
According to Ellie Mae, whose mortgage origination software handles more than 3.7 million mortgage applications annually, borrowers using VA home loans get access to mortgage rates which can be 40 basis points (0.40%) or more below the rates of a comparable 30-year fixed-rate conventional loan.
Even if you’re putting 20 percent down on a home, then, using a VA mortgage can be smarter than going with a conventional one.
VA Refinance Volume Spikes On Low Rates
The benefits of a VA mortgage continue long after closing, too.
As part of the VA Home Loan Guaranty program, all borrowers get access to the VA’s streamlined refinance mortgage program — a popular loan known formally as the Interest Rate Reduction Refinance Loan (IRRRL).
Pronounced “earl” — and sometimes called the VA Streamline Refinance — IRRRL loans accounted for more than 30% of all VA home loans closed last year.
This is more than double the number of closed refinance loans from the year prior.
So, why are VA Streamline Refinance loans so popular? Because, with few exceptions, the only qualification standard of the VA IRRRL is that your new mortgage rate must be lower than your current one.
That’s it. There are nearly no other requirements.
Under VA Streamline Refinance mortgage guidelines, lenders have no requirement to verify your credit scores; to appraise your home; or, to confirm your employment. There’s very little paperwork and very little hassle.
Therefore, whenever mortgage rates drop, VA Streamline Refinance volume climbs.
With today’s mortgage rates low, you may be refinance-eligible now.