VA Loans Blog

Your Best VA Mortgage Rate

April 2nd, 2017 3:21 PM by Joan Rusco

You may not want the lowest mortgage rate available. We know that’s a bold statement for a VA mortgage blog to make but it’s true and we’re going to explain. 

 There’s more to a mortgage than rate. A lender can also charge an origination fee.  Let’s look an example to illustrate what impact this can have on your home purchase or refinance using a VA loan.

 Lender A offers a VA mortgage rate of 3.875% and they charge 1.5 points to originate that loan. The monthly payment on a $200,000 loan would be about $940.  Lender B offers a rate of 4.125% on the same loan with an origination fee of ¼ point. Monthly payment would be $969. So you’d be better off with lender A right? Not necessarily. Let’s look at the real numbers in our example.

 If you go with lender A you’re going to pay $3,000 in origination fees to get that lower rate.  Lender B with the higher rate only charges $500 in origination fees.  To get that lower mortgage rate you’re going to pay an additional $2,500!  It would take you over 7 years to break even! Do you still want that lower mortgage rate?

 Of course the VA restricts the amount of fees a borrower can pay so as a home buyer you may turn to the seller to help pay fees. Sometimes that works although a seller is also looking at their bottom line and they’re probably going to take the offer that costs them the least.

 As you shop for a VA loan look beyond the rate.  It’s a complicated business and that’s why we do what we do. We help veterans sort through the real cost of a VA mortgage. VALoansMN will be your go-to-guy to help you make the best deal possible on your next purchase or refinance.  Pick up a phone and call us today 612-240-9922. Brad is waiting for your call.


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