VA Mortgage Rates Lower Than Conventional Mortgage Rates By 0.375 Percentage Points
Mortgage interest rates are dropping.
Since the start of the year, 30-year and 15-year mortgage rates have moved lower steadily, bestowing cheap financing opportunities upon active home buyers and existing homeowners in search of a refinance.
However, mortgage rates don't fall equally.
Applicants in search of the today's mortgage rates will find VA mortgage rates and FHA mortgage rates markedly lower than the rates available for a comparable loan via Fannie Mae or Freddie Mac.
According to Ellie Mae, current VA mortgage rates are the lowest mortgage rates today -- by far
VA MORTGAGE RATES 0.375% BELOW CONVENTIONAL RATE
For mortgage applicants in search of the today's lowest mortgage rates, mortgage software provider Ellie Mae reports that VA mortgage rates are the lowest.
The data comes from the company's Origination Insight Report, a report is culled from some of the 3.5 million mortgage loan application which pass through Ellie Mae's servers annually.
According to the September report, the average mortgage rate on a closed VA loan is a little more than 37.5 basis points (0.375%) lower than the average mortgage rate for all closed conventional loans. VA mortgage rates averaged 4.12% in August.
The next-lowest mortgage rate was the average rate for an FHA loan.
In September, FHA mortgage rates averaged 4.27% nationwide. This, too, is below the average rate for a conventional loan.
FHA mortgage rates beat conventional mortgage interest rates by about a quarter-percent. However, because FHA-insured homeowners are required to pay annual mortgage insurance premiums (MIP), the true cost of using an FHA loan is much higher than that.
Of all tracked loan types, mortgage rates for conventional loans was the highest. Conventional mortgage rates averaged 4.51% in September, according to Ellie Mae -- one-eighth percentage point above the average rate of all loans closed.
Note, though, that Ellie Mae's reported rates print higher than the average weekly and monthly mortgage rates as reported by government-backed Freddie Mac. There are two valid reasons for this.
The first reason is that Freddie Mac's rates are discounted to account for discount points. Paying discount points give borrowers access to lower rates overall.
The second reason why Ellie Mae mortgage rates are higher is because Freddie Mac's rates are meant for prime mortgage borrowers only. Ellie Mae's published rates account for all borrowers of all types.
Many mortgage banks now quote rates in the 3s.
BENEFITS OF THE VA LOAN GUARANTY PROGRAM
VA mortgage rates are available to eligible military borrowers as part of the VA Loan Guaranty Program.
The VA Loan Guaranty Program is 70 years old. It's backed by the Department of Veterans Affairs and can be used for a purchase or a refinance. The Department of Veterans Affairs guarantees VA loans against loss, which helps mortgage lenders to make available lower mortgage rates to applicants.
Aside from low mortgage rates, there are other VA loan benefits, too.
As one example, VA loans allow for 100% financing. There is no downpayment requirement with a VA loan, and mortgage insurance is never required.
Another VA loan benefit is that VA loans are assumable. This means that a home can be sold with VA financing "attached" to it.
This can be a selling point given today's low mortgage rates. If you lock a VA mortgage rate near 4%, regardless of future mortgage rates, the eventual buyer of your home can get your same four percent mortgage interest rate.
There are other VA loan benefits, too, including loose underwriting standards and access to the VA Streamline Refinance, one of the fastest and simplest mortgage refinance programs available in today's market.
ALL MORTGAGE RATES DROPPING
It's not just VA mortgage rates which are low. Rates are low for all loan types.
Since the start of the year, mortgage rates have been on steady decline and, according to Freddie Mac's weekly Primary Mortgage Market Survey, rates are down more than 62.5 basis points (0.625%) from January.
Low mortgage rates have boosted home affordability and put millions of existing U.S. homeowners "in the money" to refinance.
This wasn't supposed to happen.
At the end of last year, the Federal Reserve announced that it would wind down its third round of quantitative easing (QE3) though 2014.
Wall Street expected this move to lead mortgage rates higher. After all, the Fed had been buying $40 billion in mortgage-backed securities (MBS) monthly and, without the Fed to purchase excess MBS monthly, rates would rise to meet supply.
Yet, rates have been dropping.
A series of worse-than-expected economic data have combined with new geopolitical risk to stoke safe haven buying, a trading pattern in which investors seek safety of principal during a period of uncertainty.
Furthermore, there has been less mortgage bond issuance this year because mortgage origination volume is down.
Despite the Fed's exit, demand for U.S. mortgage bonds continues to outpace supply, which is leading 30-year mortgage interest rates lower.
Going forward, mortgage markets will remain data-dependent. Rates may rise or rates may fall. Today, though, mortgage rates at 17-month lows. The average 30-year conventional fixed rate mortgage is firmly beneath 4 percent, and VA and FHA mortgage rates are approaching the low-3s.
GET TODAY'S MORTGAGE RATES
VA mortgage rates are low, and so are mortgage rates for all other loan types. It's an excellent time to shop for a loan and compare your mortgage options -- either for a purchase or a refinance.
Get a live rate quote now. Mortgage rates are available online with no social security number required to get started, and with no obligation proceed.
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