We get plenty of reader questions about VA loans, including queries about interest rates. One of the most frequently asked questions–“What is the interest rate on a VA home loan?”
According to the Department of Veterans Affairs, the VA “no longer prescribes interest rates for VA-guaranteed loans.” Instead, borrowers must negotiate the interest rate with their chosen lender. That’s one reason why loan experts encourage borrowers to shop competitively for a home loan whether it’s a VA, FHA, or conventional mortgage.
Some borrowers examine interest rates, find a lender with an acceptable rate, and decide to commit to the purchase of a home. But how long does a borrower get when he or she makes that commitment before the interest rates are subject to change? After all, interest rates do fluctuate, so what do VA loan rules say about changing those rates?
According to Chapter Six of the VA Lender’s Handbook, the following applies:
“The lender and borrower are expected to honor any lock-in or other agreements they have entered into which impact the interest rate on the loan. VA does not object to changes in the agreed upon rate, as long as no lender/borrower agreements are violated.” If the borrower and lender have not agreed in writing on an interest rate, it could change, but if there is a lock-in rate agreement in writing, the terms of that agreement apply.
If the borrower and lender do agree to alter the nature of their written commitment, the following VA loan procedures apply:
Any increase in the interest rate that exceeds one percent requires
• Re-underwriting the VA home loan “to ascertain the veteran’s continued ability to qualify for the loan”
• There must be written documentation of the change
• The VA requires a new or corrected Uniform Residential Loan Application, (URLA) with any corrections initialed and dated by the borrower.
The VA does not set or regulate the interest rates on VA guaranteed mortgages, but as you can see, it does require the lender and borrower to honor their commitments to the agreed-upon interest rate or properly document a change agreed to by both parties.
Do you have a question about VA home loans? Ask us in the comments section.
Comments(0)