VA Loan Affordability in a High-Interest Rate Environment

VA Loan Affordability in a High-Interest Rate Environment

The housing market changes often, and one important factor that can impact buying a home is the interest rate. With current rates at levels not seen in years, what does this mean for the VA home loan program?

Mortgage interest rates have been changing recently. If you are considering buying a home or refinancing, it is crucial to understand how higher rates can affect VA loans.

VA Loans: A Valuable Option

VA loans are a good choice for veterans, active-duty service members, and National Guard and Reserve members. The US Department of Veterans Affairs guarantees VA loans. These loans offer numerous benefits, including no down payment requirements, competitive interest rates, and lenient credit score criteria. However, it’s essential to remember that interest rates are not static and can fluctuate over time.

The Impact of a Rising Rate Environment

Interest rates can change at any time. This can affect your VA loan affordability in several ways:

1. Higher Monthly Payments: As interest rates rise, the cost of borrowing also increases. Consequently, your monthly mortgage payments may be higher, even if you secure a VA loan with a competitive rate.
2. Reduced Buying Power: Rising rates can reduce your home purchasing power. If interest rates are higher, you might get a smaller loan. This means you may have to buy a house with a lower sales price or you’ll need a down payment to lower your loan amount.
3. Impact on Refinancing: If you already have a VA loan and are considering refinancing to lower your interest rate or shorten your loan term, rising rates can complicate the process. It may be more challenging to secure a lower rate, potentially diminishing the financial benefits of refinancing.

Strategies for Navigating a Rising Rate Environment

Despite the challenges posed by rising interest rates, there are several strategies you can employ to combat rising rates:

1. Lock in Your Rate: When you find a favorable interest rate for your VA loan, consider locking it in to protect yourself from future rate increases during the processing of your VA loan. Rate locks typically last for a specified period, so be sure to discuss this option with your lender.
2. Improve Your Credit Score: A higher credit score can usually help you secure a more competitive interest rate. Take steps to improve your credit profile by paying bills on time, reducing outstanding debt, and addressing any errors on your credit report.  To get advice about your specific credit situation, call 800-720-0250.
3. Work with an Experienced Lender: If eligible for a VA loan, choose a lender, like HomePromise, with expertise in VA loans. They help with answering your questions and giving advice based on your financial situation.
4. After Closing Sign Up for Refinance Monitoring with HomePromise: After you close your VA loan with HomePromise, talk to your assigned VA loan expert about refinance monitoring. HomePromse can take the worry out of refinancing and watch for a drop in rates so that you know when to refinance.  With Refinance Monitoring you can take advantage of refinancing when it’s available given your specific situation..

Conclusion

VA loans are still a good choice for veterans, surviving spouses, and service members when interest rates are up. HomePromise will assist you in understanding how higher interest rates affect your ability to afford a home with a VA loan for the long term. They will also help you with navigating a cash-out refinance with or without home equity.

Call HomePromise at 800-720-0250 now to get expert advice for your VA loan and make a smart choice in any market. They will provide you with the best terms for your loan.