Secure Your Next Mission: The Most Competitive VA Rates

How to compare VA loan rates to find the best one

Getting a mortgage backed by the VA comes with a lot of benefits. You can put 0% down. You don't have to pay for mortgage insurance. And you can probably get a lower interest rate.

The big drawback is that not every lender offers VA loans. To work with the VA, lenders first need to secure approval with this federal department. Then, they need to make sure the loans they issue under this program comply with the VA's requirements. And they're subject to reporting to-dos and quality control reviews. Because of this added work, some lending institutions choose not to offer VA loans.

That doesn't mean you only have a few choices, though. Hundreds of lenders across the country originate these kinds of loans.

The issue often isn't having too few choices. Usually, it's the opposite. With so many VA mortgage companies on the table, it can feel tricky to home in on the best loan from the best lender.

Fortunately, this four-step process can help you wade through your options to find what you need:

• Get a rate quote from any lender that catches your eye. These should be free and fast to get, and they won't affect your credit score. To help you get started with some options, we have a rate table of options from leading VA lenders.

• Apply with at least three lenders. Make sure you do this all around the same time so the hard inquiry gets grouped together, limiting the impact on your credit.

• Compare loan estimates. Specifically, you want to look at the annual percentage rate (APR), which factors in fees and the interest rate to tell you how much you'll really pay for that loan each year. You can use our VA loan calculator to plug things in and see more clearly how that specific offer would shake out for you.

• Go with the lender who offers you the best deal. By seeing what they're really going to charge in interest, fees, and closing costs, you can find the mortgage company that will offer you the most affordable VA loan.

Those steps might feel like a lot of work. But the Consumer Financial Protection Bureau says that comparison shopping like this could save you $100 a month or more.

Quick tip: Learn more about comparing mortgage offers

How VA lenders decide on your interest rate

The mortgage interest rates that lenders charge get shaped by current market forces. With VA loans, the 10-year Treasury yield plays a big role here.

Still, two different borrowers might apply for a VA loan of the same amount on the same day and get a different rate. Similarly, the same borrower might apply with two different companies and get different rate quotes from each. If the same market forces are in play, why does that happen?

It's because lenders each use different algorithms during underwriting (their process of deciding to approve a loan and at what rate). Different lenders weighing different factors differently adjusts the rate you get offered.

As part of that underwriting process, lenders look at your:

• Credit score

• Financial assets

• Income (and specifically whether or not you meet the residual income requirement from the VA, which makes sure you have enough money left over to live after paying your mortgage)

• Your debt-to-income (DTI) ratio

The better you look in these areas, the lower-risk you'll be in the lender's eyes. Lenders love low-risk borrowers. If you're likely to repay your loan, they're likely to make the money they expect. As a result, VA lenders charge lower interest rates to borrowers with better financial profiles.

Quick tip: You can work to improve your credit score and lower your DTI

Your options for refinancing a VA loan

If you get a VA loan now, you're not necessarily stuck with your interest rate — even if you get a fixed-rate loan. And you don't have to leave your equity stuck in your house, either.

You always have the option to refinance your VA loan down the road. That means replacing your current mortgage with a new one.

The VA backs two different kinds of refinances:

• IRRRL (streamline) refinancing: This gives you a way to refinance from your current VA loan to a new one that lowers your interest rate, stabilizes it (i.e., switches you from an adjustable-rate mortgage [ARM] to a fixed-rate one), or shortens your repayment term. The benefit here is that these interest rate reduction refinance loans (IRRRLs) require less paperwork than other kinds of refinancing.

• Cash-out refinancing: With this option, you can refinance any type of loan (including a VA, FHA, or conventional loan) into a new VA loan and take cash out in the process. Typically, you get a new VA mortgage that's bigger than the balance on your current loan, allowing you to pocket the difference in cash. If you don't want to liquidate a lot of your equity, you can also use this kind of refi for a rate-and-term refinance. Basically, this is your standard refinance — but under the umbrella of VA-backed loans.

Refinancing can come with some serious financial upside, but it does mean paying closing costs on your new loan.

Quick tip: When to refinance