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Average 30-year mortgage rates are hovering in the high 6% range this week after spiking close to 7% in the wake of the latest inflation report last Wednesday, according to Zillow data.
March’s Consumer Price Index data came in hotter than expected, causing mortgage rates to rise. Until inflation slows further and the Federal Reserve is able to start lowering the federal funds rate, mortgage rates are likely to remain elevated.
Depending on what incoming data shows, we could even see rates tick above 7% for the first time since November 2023.
Next week, the US Bureau of Economic Analysis will release the latest personal consumption expenditures price index. The PCE price index is the Fed’s preferred measure of inflation.
If the latest PCE numbers support the narrative that inflation is remaining stubbornly high, mortgage rates could inch up further. But the PCE price index tracks a broader range of good and services than the CPI, so it’s possible this index could show some softening that didn’t appear in the CPI report.
Ultimately, it may take a few more months of data before we see inflation cool enough for the Fed to start cutting rates. Though they were initially pricing in a rate cut at the Fed’s meeting in June, investors are now betting that we won’t get the first cut until September, according to the CME FedWatch Tool. This will likely keep mortgage rates elevated throughout the spring and summer. But we could still see them go down later in 2024.
Current Mortgage Rates
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Current Refinance Rates
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Mortgage Calculator
Use our free mortgage calculator to see how today’s mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you’ll also understand how much you’ll pay over the entire length of your mortgage.
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Your estimated monthly payment
- Paying a 25% higher down payment would save you $8,916.08 on interest charges
- Lowering the interest rate by 1% would save you $51,562.03
- Paying an additional $500 each month would reduce the loan length by 146 months
Click “More details” for tips on how to save money on your mortgage in the long run.
Mortgage Rates for Buying a Home
30-Year Fixed Mortgage Increase (+0.28%)
The current average 30-year fixed mortgage rate is 6.89%, up 28 points from where it was this time last week, according to Zillow data. This rate is also up compared to a month ago, when it was 6.53%.
At 6.89%, you’ll pay $658 monthly toward principal and interest for every $100,000 you borrow.
The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.
20-Year Fixed Mortgage Rates Rise (+0.34%)
The average 20-year fixed mortgage rate is 34 points up from where it was last week, and is sitting at 6.64%. This time last month, the rate was 6.22%.
With a 6.64% rate on a 20-year term, your monthly payment will be $754 toward principal and interest for every $100,000 borrowed.
A 20-year term isn’t as common as a 30-year or 15-year term, but plenty of mortgage lenders still offer this option.
15-Year Fixed Mortgage Rates Essentially Flat (+0.01%)
The average 15-year mortgage rate is 6.12%, just a single basis point higher than last week. It’s up slightly compared to this time last month, when it was 6.03%.
With a 6.12% rate on a 15-year term, you’ll pay $850 each month toward principal and interest for every $100,000 borrowed.
If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.
7/1 ARM Rates Increase Slightly (+0.11%)
The 7/1 adjustable mortgage rate is up 11 basis points from a week ago, currently at 6.80%. It’s down from a month ago, when it was at 7.02%.
At 6.80%, your monthly payment would be $652 toward principal and interest for every $100,000 borrowed — but only for the first seven years. After that, your payment would increase or decrease annually depending on the new rate.
5/1 ARM Rates Nearly Flat (+0.03%)
The average 5/1 ARM rate is 6.87%, a three-point increase from last week. It’s lower compared to where it was a month ago, when it was 7.06%.
Here’s how a 6.87% rate would affect you for the first five years: You’d pay $657 per month toward principal and interest for every $100,000 you borrow.
30-year FHA Rates Go Up (+0.19%)
The average 30-year FHA interest rate is 5.93% today, which is 19 basis points up from last week. This rate was 6.09% a month ago.
At 5.93%, you would pay $595 monthly toward principal and interest for every $100,000 borrowed.
FHA mortgages are good choices if you don’t qualify for a conforming mortgage. You’ll need a 3.5% down payment and 580 credit score to qualify.
30-year VA Rates Jump Above 6% (+0.42%)
The current VA mortgage rate is 6.25%, 42 basis points higher than this time last week. This rate was 5.95% a month ago.
With a 6.25% rate, your monthly payment would be $616 toward principal and interest for every $100,000 you borrow.
Mortgage Refinance Rates
30-Year Fixed Refinance Rates Inch Down (-0.08%)
The average 30-year refinance rate is 6.98%, eight basis points lower than last week. It’s also down slightly compared to a month ago, when it was 7.08%.
Here’s how a 6.98% rate would affect your monthly payments: You’d pay $664 toward principal and interest for every $100,000 borrowed.
Refinancing into a 30-year term can land you lower monthly payments, but you’ll ultimately pay more by refinancing into a longer term.
20-Year Fixed Refinance Rates Spike (+1.31%)
The current 20-year fixed refinance rate is 7.69%, which is up 131 basis points compared to a week ago. This rate was 6.53% this time last month.
A 7.69% rate on a 20-year term will result in a $817 monthly payment toward principal and interest for every $100,000 you borrow.
15-Year Fixed Refinance Rates Tick Up (+0.15%)
The average 15-year fixed refinance rate is 6.59%, which is 15 points higher compared to last week. It’s also up compared to this time a month ago, when it was at 6.34%.
A 6.59% rate on a 15-year term means you’ll pay $876 each month toward principal and interest for every $100,000 borrowed.
Refinancing into a 15-year term can save you money in the long run, because you’ll get a lower rate and pay off your mortgage faster than you would with a 30-year term. But it could result in higher monthly payments.
7/1 ARM Refinance Rates Drop a Full Percentage Point (-1.12%)
The average 7/1 ARM refinance rate is 6.49%, down 112 points from where it was last week. It’s also down a bit from a month ago, when it was 7.94%.
Refinancing into a 7/1 ARM with a 6.49% rate means your monthly payment toward principal and interest will be $631 for every $100,000 you borrow. This will be the payment for the first seven years, then your rate will change annually unless you refinance again.
5/1 ARM Refinance Rates Fall (-0.76%)
The 5/1 ARM refinance rate is 6.41%, which is lower than it was this time last week. It’s also down a lot compared to this time last month, when it was 7.59%.
A 6.41% rate will result in a monthly payment of $626 toward principal and interest for every $100,000 borrowed. You’ll pay this amount for the first five years of your new mortgage.
30-Year FHA Refinance Rates Increase Somewhat (+0.19%)
The 30-year FHA refinance rate is 5.95%, which is 19 points higher than last week. This rate was 5.49% this time last month.
A 5.95% refinance rate would lead to a $596 monthly payment toward the principal and interest per $100,000 borrowed.
30-Year VA Refinance Rates Inch Up (+0.12)
The average 30-year VA refinance rate is 5.91%, which is up 12 points compared to where it was was last week. This rate was 5.82% a month ago.
At 5.91%, your new monthly payment would be $594 toward principal and interest for every $100,000 you borrow.
Are Mortgage Rates Going Down?
Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022. Mortgage rates also rose dramatically in 2023, though they started trending back down toward the end of the year. Though rates have been somewhat elevated recently, they should go down by the end of 2024.
For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease further. Check out some of our best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
Source: businessinsider.com
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Reverse mortgage industry professionals have spoken for months about the consequences of high interest rates on their ability to pursue business, and now AARP has taken a closer look at the impacts.
While higher rates are bad news for the mortgage industry in a broad sense, the impact on reverse lending is more nuanced, Bruce Simmons of American Liberty Mortgage in the Denver area explained to AARP.
“If a reverse mortgage can help your situation, it still makes sense for a lot of people,” Simmons told the organization. “There are so many people who can benefit from this today, even with the rates the way they are.”
These sentiments echo what Simmons shared with RMD at the beginning of this year when asked about how business is progressing after the general tumult observed in 2023. Inconsistent interest rate forecasts have made things challenging in his business, but different kinds of marketing — including a refocusing exercise on his existing marketing efforts — have helped to improve things, Simmons told RMD in February.
But a rise in interest rates also impacts the amount of money owed on the negatively amortizing loan, observed Stephanie Moulton, a longtime reverse mortgage academic researcher from Ohio State University.
“It might accelerate the growth of the balance and reduce, potentially, the equity when your heirs go to sell the home, because your balance is going to grow faster,” she told AARP.
But the utility of eliminating a forward mortgage payment still has the potential to add value for reverse mortgage borrowers, along with a raft of disbursement options such as a standby line of credit or monthly term payments, Simmons added.
Bruce McClary, senior vice president of the National Foundation for Credit Counseling (NFCC) also shared that while reverse mortgages can add value for borrowers in certain situations, the fee structure of a home equity line of credit (HELOC) could potentially make more sense for some seniors. But certain situations may make a reverse mortgage a better idea for some individual borrowers.
“[It] depends on an individual’s capacity to borrow, the reasons for borrowing and what they’re going to use the money for,” McClary told AARP. “The answers will be different depending on people’s financial circumstances and their goals.”
Related
Source: housingwire.com
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Legislation targeting LGBTQ+ communities is intensifying across U.S. states. Since 2022, the number of states banning gender-affirming care has risen from four to 23, and 21 states banned or restricted abortion. Two-thirds of states also currently have laws on the books that criminally penalize certain activities based on a person’s HIV-positive status.
Recent Washington Post analysis of FBI crime data reveals that hate crimes in K-12 schools have more than quadrupled in response to restrictive laws.
In 2017, long before the most recent legislation, a survey by National Public Radio, the Robert Wood Johnson Foundation and the Harvard T.H. Chan School of Public Health found more than half of the LGBTQ+ community regularly reported experiencing threats, harassment or violence due to their sexuality or gender identity.
It stands to reason that community members may wonder how to plan for their safety and well-being. If you need to move due to safety concerns — and have some time to prepare for the move — any financial planning you can do beforehand will go a long way. Consider the following six tips from financial and LGBTQ+ experts around the country.
How to financially prepare for a move (if you can)
1. Evaluate your assets and expenses
Taking stock of your income, expenses and assets can help you figure out what it will take to make your move a reality. Lindsey Young, a certified financial planner in Baltimore, says reviewing regular expenses, moving expenses and any costs you may face from temporary unemployment can help you understand where your money is going and plan where you want it to go.
Moving is expensive, and the LGBTQ+ community already tends to earn less than straight and cisgender workers on average, according to a Human Rights Campaign analysis of full-time LGBTQ+ workers and Bureau of Labor Statistics data. Transgender men and women, LGBTQ+ people of color and LGBTQ+ women face even more pronounced pay gaps and discrimination.
However, the LGBTQ+ community also has a rich history of supporting one another through mutual aid. So, check with your support network to see what’s available. Be aware that seeking help and support is normal, especially during challenging political moments.
2. Acquire cash on hand
Once you know how much money you need, consider how you might get it and create cash flow, says Young. For example, can you take on extra shifts at work? A second job? Can your chosen family or a GoFundMe make up the difference?
If you need to move but don’t have cash, says Young, consider what existing lines of credit you can access, such as a home equity line of credit, or HELOC, or credit card.
Also, consider whether you would want — or be able — to take on repaying new debt over the next several months or years. Are you more comfortable taking on debt to make a move happen, or would you prefer to tough it out where you are? Young says there is no correct answer, and it’s a matter of “understanding what their priorities are to really figure out what the right path forward is.”
3. Assemble your documents and back them up
Wherever you are, it’s always helpful to get your important documents together in one place. Make photocopies of anything important, such as medical records and personal IDs, and upload them to a safe cloud location so you can access them anywhere.
4. Specify your power of attorney
Officially designating who will make medical and financial decisions on your behalf is essential to putting someone you trust in charge if something happens to you. Make your will and choose your power of attorney so one isn’t chosen for you.
This step is crucial for anyone concerned that their biological family members (or the state) might try to challenge their wishes, even if they’re married. If your situation is complicated, finding an attorney who specializes in LGBTQ+ clients can help ensure that your wishes are followed despite any contentious family relationships you may have.
The risk of not planning can include that your wishes and loved ones aren’t honored, says Frank Summers, a certified financial planner in Charlotte, North Carolina. “I know of situations in which the estate of somebody who passed away went to a family member who did not approve of their relationship, who didn’t like gay people and proceeded to make the life of the surviving partner extraordinarily difficult when that person is dealing with a tremendous and profound grief,” says Summers.
5. Connect to members of your community, old and new
Connecting to an LGBTQ+ organization or group in a new city might make you feel safer, as well as possibly open up connections to new jobs, health care providers and relationships.
As director of transgender services at The Center on Colfax in Denver, Sable Schultz has seen a significant uptick in people connecting to peer support group services in person and online as they prepare to move to Colorado. Considered a “refugee” state, Colorado has sheltered thousands of newcomers in 2024, and its Medicaid coverage includes gender-affirming services.
Summers sees particular groups of people impacted by legislation — trans and nonbinary people, people wanting to start families, people with children and people who require ongoing care. Needing to access care and not knowing if you’ll be able to get it (or, if you can get access, not knowing if you’ll receive care with respect) can be overwhelming and scary, especially in a state like North Carolina that recently banned gender-affirming care and severely restricted abortion.
So wherever you’re headed, identify a support group, Queer Exchange, Facebook affinity group, or a social service provider that can connect you with housing, medical care, community or other support nearby.
6. Plan a safe travel route
If you’re getting on the road, consider how you can safely get from one place to another, including where you can use the restroom. Be sure to check in with local queer groups to identify where travelers have successfully stopped and stayed in the past.
If moving or traveling requires you to go through states targeting the LGBTQ+ community, particularly trans and nonbinary people, make a plan for how you can drive along large interstates and stop in larger towns and cities, or at least places that identify themselves as allies to the community.
What to do if you have to move and can’t prepare
Conversations about money aren’t usually related to an immediate life or death scenario, but for too many members of the LGBTQ+ community, that is the current reality. Safety is top of mind, especially given the ongoing rise in hate crimes.
Schultz describes Colorado as a refugee state because it mandates health care protections — including requiring gender-affirming care of Medicaid services — as well as general protections around gender identity and gender expression.
Other states where gender-affirming care is practiced include Alaska, California, Connecticut, Delaware, Hawaii, Illinois, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, Washington, Wisconsin, and Wyoming; and Washington, D.C.
If you’d feel safer in any of these states, it’s possible even a lack of financial planning shouldn’t keep you from making the move. For those who are currently unhoused or living out of their car, says Schultz, sometimes “it’s at least safer to be unhoused here [in Colorado] than it would be to be wherever they were. And they can at least get the health care that they need.”
There’s no shame in doing what you must to get to a safer place where you are valued and wanted. And if you’re an ally to the LGBTQ+ community, check in on your loved one. Consider what emotional, financial or other support you can offer them during this challenging time.
Source: nerdwallet.com
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Building equity is one of the biggest advantages of owning a home. With a home equity loan or home equity line of credit (HELOC), you can take advantage of that equity to finance home improvements, consolidate debt or pay for other big expenses.
While getting home equity financing is a fairly simple process, it’s important to review the details before applying. Lenders have standard criteria that homeowners must follow to qualify for either loan, as well as their own specific requirements. Make sure to compare different lenders and take a look at the requirements before applying.
Below, we’ll cover the general criteria for home equity loans and HELOCs as well as more on how to choose the right financing option for you.
How do home equity loans and HELOCs work?
Home equity loans and HELOCs are secured loans that act as second mortgages. Both use your property as collateral for the debt.
With a home equity loan, you get access to a lump sum of cash upfront and pay it back over a period of five to 30 years at a fixed interest rate.
A HELOC is an ongoing line of credit from which you can withdraw funds as needed. With a HELOC, you have the draw period and the repayment period. During the draw period (typically 10 years), you can borrow money on a revolving basis, up to a limit, and you’ll typically pay interest only on what you’ve borrowed. During the repayment period (often 20 years), you’ll pay back both the principal and interest on the loan.
Both are good options for homeowners in need of access to cash, but there’s always a risk when you borrow against your home. If you default on your payments, you run the risk of losing your property.
Requirements to borrow home equity
The requirements to qualify for either a home equity loan or HELOC are similar. Although each lender has its own qualifications, the following checklist provides general criteria to help you get started.
1. Have at least 15% to 20% equity in your home
Home equity refers to the ownership stake in your home. Your equity is calculated by the amount of your down payment together with all the mortgage payments you’ve already made. With each mortgage payment you make, the less you owe on your home and the more equity you have. If an appraisal increase the value of the home, that will also yield more equity.
Most lenders require you to have at least 15% to 20% equity in your home to take out a home equity loan or HELOC. If you made a 20% down payment when you purchased your property, you’ll have already met the requirement to borrow against your equity.
2. Your loan-to-value ratio shouldn’t exceed 80%
Your loan-to-value ratio, or LTV, is another factor lenders consider when deciding whether to approve you for a home equity loan or HELOC. Your LTV is determined by dividing your current mortgage balance by the home’s appraised value. Having a lower LTV means less risk for mortgage lenders.
If your home is worth $300,000 and your loan balance is $200,000, here’s how you’d calculate your LTV:
$200,000 / $300,000 = 0.67
Your LTV is expressed as a percentage. In this example, your LTV is 67%, meaning you have 33% equity in your home.
While requirements can vary across lenders, the rule of thumb is that your LTV shouldn’t exceed 80%. Making a higher down payment and paying down your mortgage are two ways to lower your LTV.
3. Have a credit score in the mid-600s or higher
Most lenders want to see a minimum credit score of 620 in order to qualify for a home equity loan or HELOC.
Lenders use your credit score to determine the likelihood that you’ll repay the loan on time, so a better score will improve your chances of getting approved for a loan with better terms. A higher credit score of 700 or more will make you eligible for a loan at a lower interest rate, which will save you a substantial amount of money over the life of the loan.
4. Your debt level shouldn’t exceed 43%
Your debt level is determined by your debt-to-income ratio, which is your monthly debt payments divided by your gross monthly income. Your DTI ratio helps lenders determine if you’re capable of paying back your loan on time and of making consistent monthly payments.
To calculate DTI, lenders tally the total monthly payment for the house — mortgage principal, interest, taxes, homeowners insurance, direct liens and homeowner association dues — and any other outstanding debt. That total debt is then divided by your monthly gross income to get your DTI ratio.
Some lenders prefer that your monthly debts don’t exceed 36% of your gross monthly income, but many others are willing to go as high as 43%. If your DTI ratio is higher than 43%, consider paying down your debts first to lower your DTI.
5. Have sufficient income
Lenders want to make sure that you can pay back the loan, so they’ll lend only to those who can prove sufficient income. If you don’t have traditional employment or a stable source of income, you may have trouble qualifying for a home equity loan or HELOC.
How much can you borrow with a home equity loan or HELOC?
The more equity you have in your home, the more you’re eligible to borrow. In general, you can borrow around 80% to 85% of the equity in your home, minus your current mortgage balance.
You can determine how much money you’ll be able to obtain from a home equity loan by starting with the current value of the home. If, for example, your home is worth $300,000 and a bank lender allows you to borrow up to 80% of the value of your home, you simply multiply the two values to get the maximum amount you can borrow, which is $240,000.
$300,000 x 0.8 = $240,000
But if you have a balance on your mortgage of $200,000, you need to subtract it from the $240,000 maximum the bank will let you borrow.
$240,000 – $200,000 = $40,000
That means you can borrow $40,000 for a home equity loan or HELOC.
Should you get a home equity loan or a HELOC?
Home equity loans and HELOCs can be used for similar purposes, but they have some important differences. Neither product is better than the other, so consider your own expenses and goals.
If you need to fund a single project with a set cost, a home equity loan may be the better option, especially if the predictability of a fixed interest rate and monthly payment appeals to you. A HELOC may make more sense if you want flexible access to funds over a long period of time rather than an upfront sum of cash.
You should get a HELOC if:
You need access to credit for an extended period of time. HELOCs have a draw period that typically last five to 10 years.
You need more time to repay the loan amount. The repayment period for HELOCs ranges from 10 to 20 years.
You aren’t sure how much money you’ll need. HELOCs give you the flexibility to withdraw money in installments and not all at once. During the draw period, you can borrow up to a limit as many times as you like, and only pay interest on what you borrow. This makes HELOCs a good option for managing variable or unpredictable costs.
You should get a home equity loan if:
Your want a predictable monthly repayment schedule. Unlike variable-rate HELOCs, home equity loans have fixed interest rates, making it relatively easy to factor into your monthly budget.
You have a specific expense in mind. You receive 100% of the funds from a home equity loan upfront, which can be useful if you need a set amount of cash to cover a home improvement project, pay off high-interest debt or another need.
Alternatives to home equity loans and HELOCs
A home equity loan or HELOC can be a good way to fund large expenses, but there are other financing options that may be a better fit for your situation. Some alternatives you may want to consider include:
- A cash-out refinance. With a cash-out refinance, you are cashing out the equity you’ve built in your home over the years. You replace your existing mortgage with a new, larger one and pocket the difference as cash. The money you borrow is rolled into your new mortgage, so you’ll have only one monthly payment. A cash-out refinance is a good option if you can get a better rate than the one on your existing mortgage.
- A personal loan. If you need to borrow only a small amount of money, a personal loan might be a better fit than a home equity loan or HELOC. The interest rate will typically be higher and the loan term shorter, but it’s less risky because it’s an unsecured loan. Plus, you won’t have to go through a home appraisal or pay closing costs.
- A balance transfer credit card. If the main reason you’re looking to take out a loan is to consolidate other high-interest debt, balance transfer credit cards let you combine your debts into one card that has a long 0% APR introductory period. If you can pay off the debt before the 0% introductory period ends, you’ll get rid of your debt faster. Just be sure to plan ahead carefully: If you’re still carrying a balance by the end of the introductory period, you’ll be charged the regular credit card APR, which can be high.
The bottom line
A home equity loan and HELOC are two ways you can tap into the equity of your home. To qualify for either loan with reasonable terms, you should have at least 15% to 20% equity in your home, a LTV ratio of 80% or lower, a credit score of at least 620 (the higher, the better) and a DTI ratio no higher than 43%.
Though specific qualifications vary between lenders, make sure you have a reliable payment history and source of income to be eligible for a home equity loan or HELOC.
FAQs
Some lenders will provide a home equity loan or HELOC if you don’t have a job or are retired, but instead have regular income from a retirement account such as a pension. The income can also come from a spouse or partner’s employer, government assistance or alimony.
Lenders are typically seeking at least 15% to 20% equity in your home in order to qualify for a home equity loan or HELOC. However, some lenders will allow you to borrow with less equity.
Minimum credit scores vary from lender to lender, but most require you to have at least a 620 credit score. You’ll have a better chance of qualifying and getting access to lower interest rates if your credit score is 700 or above.
You can improve your credit score before you apply for a home equity loan by making payments on time, paying down the amount that’s owed on credit cards and avoiding taking out any new loans or making any major purchases.
Source: cnet.com
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Artit_Wongpradu/Getty Images; Illustration by Issiah Davis/Bankrate
Key takeaways
- An FHA construction loan is a type of FHA loan that covers the cost of building a home, including the land or lot purchase, building materials and labor.
- There are two types of FHA construction loans: an FHA construction-to-permanent loan and a FHA 203(k) loan.
- FHA construction loans can be rolled into an FHA permanent mortgage.
If you’d rather build a home than buy one, an FHA construction loan could help pay for the project. Like a regular FHA loan, this type of financing is insured by the Federal Housing Administration (FHA) and offered by FHA-approved mortgage lenders. Here’s how to get one.
What is an FHA construction loan?
An FHA construction loan is a type of FHA loan used to build a home. It works like a conventional construction loan by providing short-term financing for a range of construction costs, from the architect’s fee to the certificate of occupancy. Often, borrowers convert these loans to long-term mortgages once the house is built.
Unlike conventional construction loans, however, FHA construction loans are insured by the FHA. That means if you have a down payment of at least 3.5 percent, you could qualify for the loan with a credit score as low as 580.
How does a construction loan work?
Construction loans aren’t like regular mortgages. They typically last for one year, during which time the lender releases payments, usually directly to your contractor. The lender enlists an inspector to evaluate the project at various stages, and releases more funds once everything checks out. Once construction is finished, the loan either converts to a traditional mortgage or the borrower obtains a mortgage to pay it off.
Types of FHA construction loans
- FHA construction-to-permanent loan: An FHA construction-to-permanent loan finances the ground-up construction of a home — including the purchase of the land or lot — then converts to a regular FHA mortgage. This is also known as a one-time or single-close loan; you won’t have to pay closing costs for two separate loans.
- FHA 203(k) rehab loan: An FHA 203(k) loan finances the cost of buying an existing home plus renovations and repairs. There are two types of 203(k) loans: a standard 203(k) for renovations costing $35,000 or more; and a limited 203(k) for smaller-scale, less expensive projects. Either option allows you to obtain one loan to buy and fix up a home, instead of two loans.
FHA construction loan requirements
The qualifying requirements for an FHA construction loan are similar to those for standard FHA loans, but with a few additions.
To qualify for any FHA loan, you’ll need to meet the following criteria, at minimum:
- Credit score: At least 580, or as low as 500 if putting down at least 10 percent
- Debt-to-income (DTI) ratio: No more than 43 percent (with some exceptions)
- Down payment: 3.5 percent with a credit score of at least 580, or at least 10 percent with a credit score between 500 and 579
- Loan limits: No more than the FHA loan limits for the year; for 203(k) loans, no more than the FHA loan limits, the home’s after-renovation value plus improvement costs or the home’s after-renovation value, whichever is less
- Mortgage insurance: Upfront and annual FHA mortgage insurance premiums, paid for the life of the loan in most cases
- Occupancy: Primary residences only
On top of these requirements, FHA construction loans require satisfactory documentation detailing the construction or renovation project, including information about the contractor you plan to work with. For a standard 203(k) loan, you’ll be assigned a 203(k) consultant to estimate the remodeling or repair costs.
Whether you get a construction-to-permanent or rehab loan, the work will also be subject to inspection as the project progresses.
How to get an FHA construction loan
You can get an FHA construction loan from an FHA-approved lender, though not every FHA lender offers this type of financing. If you’re not sure where to start, search the U.S. Department of Housing and Urban Development’s list of lenders by state or county. You can filter for 203(k) lenders, too, if that’s the type of loan you’re after.
From there, the process involves connecting with a contractor and getting preapproved for financing. Here’s an overview:
- Prepare your credit and finances. Construction loan interest rates are often higher than the rates for a regular mortgage. While you can get an FHA loan with a relatively low credit score and down payment, a better score and a higher down payment could help you get a lower rate and pay less in mortgage insurance. If you plan to build a brand-new home, you’ll also want extra stashed away for the inevitable budget snags that come up in construction. Here’s more on the cost of building a home.
- Partner with a contractor and real estate agent. Whether you plan to build a home or renovate an existing property, you’ll need to work with a contractor to learn your costs and draw up plans, then provide these details to your lender for approval. If you’re getting a standard 203(k) loan, you’ll also work with a 203(k) consultant to estimate costs. From there, a real estate agent can help you find the right parcel of land, lot or fixer-upper.
- Get preapproved for a construction or rehab loan. You’ll need to meet all of the FHA loan requirements and any other criteria your lender stipulates. If you qualify, your lender will base the loan amount on the appraised after-construction or after-renovation value of the home.
Alternatives to an FHA construction loan
An FHA construction loan is just one type of construction financing. While it can help you build or renovate a home, you can’t use it for an investment property or vacation home, and you’ll have to pay mortgage insurance premiums, which add to your costs. Here are alternatives to consider:
- Conventional construction loans: More widely available than FHA construction loans, conventional construction loans include construction-to-permanent and construction-only options. The downsides: You’ll need to come up with a higher down payment than the FHA version, as well as have a higher credit score. You won’t have to pay mortgage insurance for the entire loan term, however, unlike most borrowers with an FHA loan.
- Renovation loan: Instead of a 203(k) loan, you might look into a conventional HomeStyle renovation loan, which provides financing up to 75 percent of the home’s after-renovation value.
- VA or USDA construction loans: If you’re a service member or veteran or have a lower income and want to build a home in a qualifying rural area, consider a VA or USDA loan, respectively. These don’t require a down payment or mortgage insurance and can have flexible credit standards. You’ll need to pay a one-time funding fee for the VA loan and guarantee fees for a USDA loan, however.
- Home equity options: If you want to make improvements to your home or another property you own, you might have enough equity in your current home to make that happen. Depending on your needs and goals, the options include a home equity loan (a second mortgage) or a line of credit, known as a HELOC.
- Refinance and take cash out: If interest rates have gone down since you got your mortgage, you might be able to refinance to a new, bigger loan with a lower rate and cash out some of your equity to pay for renovations. Generally, this option works best for homeowners who can get a lower rate, have equity to spare and plan to do extensive remodeling.
FAQ
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Many types of mortgage lenders offer FHA loans, but not all offer FHA construction loans. You can search FHA-approved lenders in your area on the U.S. Department of Housing and Urban Development’s website, or start with our guides to the best FHA mortgage lenders and best FHA 203(k) rehab mortgage lenders.
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If you’re making a down payment of 3.5 percent, the minimum credit score for an FHA construction loan is 580. If you have at least 10 percent to put down, you could qualify with a score as low as 500.
Source: bankrate.com
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Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.
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Are you thinking about purchasing a second home? Maybe you live in a cold climate and want a home in a warmer area during the winter months. Or, maybe you have adult children who moved away and you’d like to be near them during the holidays.
A traditional mortgage is one option for purchasing a second home, but your primary home could also help. For example, you may be able to tap into your home’s equity with a home equity loan to get the money for a down payment or cover the full cost of purchasing of a second home.
Home equity loans are often a smart option to consider because you can borrow large amounts at a competitive rate. And, since the average homeowner currently has about $193,000 in tappable equity, a home equity loan may be a compelling way to purchase a second home right now.
Find out the top home equity loan rates available to you now.
3 times to use a home equity loan to purchase a second home
Here are three times it makes sense to use a home equity loan to purchase a second home.
When you have plenty of home equity but little cash
The amount of cash required to purchase a second home is a significant hurdle for many people. And, if you take the traditional mortgage route, you will need enough for a down payment and to cover your closing costs. That often means having tens of thousands of dollars or more on hand, depending on the price of the home and other factors.
A home equity loan could be useful if you don’t have as much cash as you need on hand to purchase a second home. You can use the funds to make a down payment on the second home you’re purchasing, for example. And, depending on the amount of equity available to you, you may have enough to also cover the closing costs for your second home.
Explore your top home equity loan options online now.
When you need a fixed monthly payment
There are multiple ways to finance the purchase of a second home with your home equity. Some, like home equity loans, come with fixed interest rates. Others, like home equity lines of credit (HELOCs), have variable rates that can change over time. If your goal is to have a consistent monthly payment amount on the money you borrow from your home’s equity, a home equity loan is usually the better option.
“Fixed-rate home equity loans provide much more certainty when compared to a variable-rate HELOC because homeowners can know exactly what their monthly payment will be before taking out the loan,” says Darren Tooley, a senior loan officer at Cornerstone Financial Services. “This allows the borrower to budget and know exactly what to expect on a month-to-month basis.”
When you know exactly how much money you need
Home equity loans allow you to borrow against your equity with a lump-sum loan. As such, it can make sense to use a home equity loan to purchase your second home if you know exactly how much money you’ll need to make the purchase.
For example, you may be purchasing a new home that is unlikely to need repairs in the near future. Or, you may have a clean inspection report and aren’t planning to make updates or changes to the home’s appliances, fixtures or features.
In these cases, you likely won’t need to borrow extra home equity money for renovations or repairs, so the costs are relatively fixed in terms of the amount you need to borrow. In turn, a home equity loan can make more sense than other options.
Compare your home equity lending options to find the right loan for you today.
The bottom line
If you’re in the market for a second home, it can make sense to use a home equity loan to fund your purchase. That’s especially true if you have plenty of equity but little cash, want a fixed monthly payment amount and know exactly how much money you’ll need to purchase your second home. Compare your home equity loan options now.
Source: cbsnews.com
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*Rates and APYs are subject to change. All information provided here is accurate as of March 28, 2024.
Our writers and editors have invested thousands of hours analyzing and vetting lenders offering VA loans. Through exhaustive research, we’ve come up with a list of the best VA mortgage lenders for military members and their families, including Navy Federal, Rocket Mortgage and Veterans United. Read on for our Best VA loan lender reviews and a comprehensive lending guide on how to find and apply for a VA loan.
Money’s Main Takeaways
- VA loans are one of the main benefits the federal government offers to retired and active-duty members of the military
- Borrowers can qualify for a VA loan with a lower credit score and 0% down payment compared to conventional loans
- There is no private mortgage insurance, but borrowers will be required to pay a funding fee
- VA loans offer competitive interest rates compared to other loan options
Our Top Picks for Best VA Loan Lenders of April 2024
Best VA Loan Lenders Reviews
- Lowest fees on our list
- Non-VA mortgage options that require no down payment
- 356 branches worldwide
- No lender fees
- Small number of branches within the U.S.
- Membership strictly limited to military members, spouses, family members, veterans and the Department of Defense
- Customized rates only offered to members
HIGHLIGHTS
- Sample rate
- 5.750% (6.223% APR) on a 30-year fixed-rate purchase loan of $300,000
- Minimum credit score
- Unstated, VA recommendation of 620 is suggested
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- Continental U.S.
- Pre-approval time
- Approximately 3 business days
- Mobile app
- Yes
- NMLS ID
- 399807
Why we chose it: A combination of low lender fees, several loan assistance programs and a wide selection of mortgage loans make Navy Federal Credit Union our best VA loan lender overall.
Navy Federal Credit Union offers military families low rates on financial products, such as personal loans, auto loans and credit cards. The credit union’s VA home loan program features a fast pre-approval process and loan options with no down payment. No PMI is required, either. Navy Fed also recently introduced its no-refi rate drop, where you could qualify for an interest rate reduction without going through the refinancing process.
Additionally, Navy Federal’s Shop & Lock feature allows you to lock in your rate for up to 60 days while you shop for a home, plus an additional 60-day lock once you’ve submitted a purchase agreement. Other perks include up to $9,000 cash back for working with a real estate agent at RealtyPlus, the credit union’s real estate service and a rate match guarantee where Navy Federal will match a better rate offered by another lender or give you $1,000 if all qualifying conditions are met.
Membership is required to use Navy Federal’s services. All active duty, retired and veteran service members of all armed forces branches — plus their families, immediate relatives and some household members — are eligible. Membership is also open to Department of Defense civilian personnel. To become a member, you simply open a savings account with a minimum of $5.
- Access to your loan information is available 24/7 with the proprietary mobile app
- Credit scores as low as 580 accepted
- Debt-to-income ratios as high as 60% accepted
- No HELOCs offered
- No USDA loans offered
- No physical locations for in-person service
HIGHLIGHTS
- Sample rate
- 5.99% (6.429% APR) with 2.125 points purchased ($5,843.75) on a purchase loan of $275,000
- Minimum credit score
- 580
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- All 50 U.S. states
- Pre-approval time
- 10-15 minutes
- Mobile app
- Yes
- NMLS ID
- 3030
Why we chose it: Rocket Mortgage’s (formerly Quicken Loans) fully online application and closing process, along with its multiple tools for keeping track of your in-process and existing loans make it our pick for best online VA loan lender.
Rocket Mortgage is an online lender that stands out for its relatively seamless online mortgage application process. While the experience may vary depending on each borrower’s situation, Rocket Mortgage’s website and mobile app allow you to submit all of your paperwork digitally and track every step of your loan’s processing.
While you have the option of speaking with a live representative, you can also communicate with Rocket Mortgage through online or mobile messaging.
Although Rocket Mortgage doesn’t have the broadest loan offering, it does work with all the major VA loans (purchase, refinance, IRRRL) and considers credit scores as low as 580 and debt-to-income ratios as high as 60%. Borrowers buying a home through Rocket Homes and financing through Rocket Mortgage could get a 1.25% closing credit, up to a maximum of $10,000.
For more detailed information, read our full review of Rocket Mortgage (Quicken Loans).
- Broader selection of veteran-focused loans than competitors
- Offers real estate services for veterans
- Customer support is available 24/7
- No HELOC products offered
- Only 26 affiliate branches across 17 states
HIGHLIGHTS
- Sample rate
- 5.875% (6.307% APR) with 1.5630 points purchased ($4,610.85) on a 30-year fixed-rate purchase loan of $295,000
- Minimum credit score
- 600
- Minimum down payment
- $0 for qualifying borrowers
- Availability
- All U.S. states
- Pre-approval time
- Not stated
- Mobile app
- Yes
- NMLS ID
- 1907
Why we chose it: Veterans United offers more veteran-focused mortgage options than the standard purchase, refinance and streamline products, making it our choice for best VA loan lender for VA loan variety.
Veterans United guarantees more loans than any other VA-approved lender, according to The Department of Veterans Affairs. The VA compiles a list each month of the top lenders, and Veterans United Home Loans hasn’t budged from its number-one spot in more than six months.
In addition to its reasonable qualifying credit score and income requirements, Veterans United offers a wide variety of loan types: purchase, refinance, IRRRL (streamline) VA loans, Jumbo VA loans, VA energy-efficient mortgages and VA cash-out refinance loans.
Jumbo VA loans can be a good option for veterans who no longer have their full VA entitlement, which means that their VA loans have a limit placed on the total amount borrowed (unlike veterans with full entitlement). Energy-efficient mortgages are not common to VA loans and are a good option for anyone looking to add energy-efficient improvements to their new home.
- Second-lowest fees of any lender we’ve reviewed
- Loan amounts up to $1 million
- No PMI insurance required
- Alternative or non-traditional credit and income data not considered for loan applications
- Funding fee required
HIGHLIGHTS
- Sample rate
- 5.75% (6.024% APR) with 1.125 points purchased on a 30-year fixed-rate purchase loan of $450,000
- Minimum credit score
- 620
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- All U.S. states
- Pre-approval time
- Within three business days
- Mobile app
- Yes
- NMLS ID
- 401822
Why we chose it: PenFed currently offers the lowest mortgage rate for a 30-year fixed-rate loan, which makes it our pick for the best VA loan lender for competitive rates.
When it comes to VA loans and mortgages, PenFed Credit Union stands out for offering some of the lowest rates across the board on conventional, FHA, VA, Jumbo and adjustable-rate mortgages. Eligible borrowers may qualify for zero down payment. Additionally, PenFed doesn’t require borrowers to acquire private mortgage insurance (PMI).
You must be a member of PenFed to use PenFed’s VA loan services, but joining is an easy process: Simply open a savings account at the credit union with a minimum of $5.
For more detailed information, read our full review of Penfed.
- Accepts credit scores as low as 600
- Variety of mortgage products available
- Self-employment and nontraditional income accepted
- Physical branches only in Missouri
- Other fees apply
HIGHLIGHTS
- Sample rate
- 6.625% (6.864% APR) on a 15-year fixed-rate purchase loan of $300,000
- Minimum credit score
- 600
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- All U.S. states
- Pre-approval time
- Not stated
- Mobile app
- Yes
- NMLS ID
- 400039
Why we chose it: North American Savings Bank is dedicated to servicing customers in the Kansas City, MO area, but it extends its mortgage services to individuals all over the U.S. Notably, NASB works with borrowers with credit scores as low as 600, lower than what other many lenders allow.
No origination fees are charged on VA loans from NASB, but a VA loan funding fee may be required. Many loans don’t require a down payment, either. NASB offers a loan payment calculator on its site where borrowers can see potential VA home loan rate scenarios.
In addition to standard VA loan products (purchase, IRRRL, cash-out refinance), North American Savings Bank offers the widest variety of mortgage options for individuals who are unable to provide “traditional” credit and income data, such as people who are self-employed.
- VA Cash-out refinance, IRRRL and Jumbo IRRRL available
- Discounts for bundling services (e.g. home and auto insurance)
- Variety of discounts through USAA Perks (car rental, travel, shopping)
- Requires membership in USAA
- No home equity loans or lines of credit
HIGHLIGHTS
- Sample rate
- 6.125% (6.447% APR) with 0.801 points purchased for a fixed-rate purchase loan and 5.875% (6.196% APR) with 0.933 points purchased for a VA Jumbo purchase loan
- Minimum credit score
- 620
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- All U.S. states
- Pre-approval time
- Not disclosed
- Mobile app
- Yes
- NMLS ID
- 401058
Why we chose it: For those looking to refinance their existing VA loan, USAA offers all of the possible options with competitive rates and terms.
USAA stands out as a VA loan refinance leader for offering all the available options: VA Interest Rate Reduction Refinance Loans (IRRRL), VA Jumbo Interest Rate Reduction Loans, VA Cash-Out Refinance Loans and Jumbo VA Cash-Out Refinance Loans. With either cash-out refinance, you can refinance up to 90% of your home’s value. With IRRRLs, you can refinance up to 100%.
However, rates at USAA aren’t the lowest among the lenders in our top picks. Still, the company’s rates are within the typical range for the market and the option to finance your VA funding fee into your total loan amount is available with all four refinance types.
USAA offers additional financial products and services, such as insurance, banking and investing. All of its products are available only to members. Military members, veterans, their spouses, children, and pre-commissioned officers are eligible.
Members also get discounts for bundling (e.g. home and auto insurance) as well as discounts on car rentals, travel packages, home security, moving services, select retailers and more.
*USAA does not disclose the credit score, loan amount or down payment of its advertised rates. To get a better estimate of your potential monthly payment, use the USAA VA Home Loan Mortgage Payment Calculator.
- Allows you to compare multiple mortgage lenders’ rates at the same time
- Over 1,500 partnered lenders in its network
- Offers credit monitoring tools
- Limited contact options
- Customer support does not address issues with the lender of your choice
- Does not service loans
HIGHLIGHTS
- Minimum credit score
- Varies by lender
- Minimum down payment
- Varies by lender
- Availability
- Varies by lender
- Pre-approval time
- Varies by lender
- Mobile app
- Yes
- NMLS ID
- 1136
Why we chose it: LendingTree is an online marketplace that allows you to compare rates on multiple products, from mortgages to personal loans and even credit cards, making it our pick for the best marketplace for comparing VA loan rates.
LendingTree stands out from its competition due to its more than 1,500 partnered mortgage lenders and easy-to-use mobile app.
Borrowers can request multiple quotes (up to three at the same time), which include projected rates and closing costs all in one place. It is also free to use and doesn’t impact your credit score.
The only notable downside to LendingTree’s services is that the company is not a loan servicer or originator, meaning that its customer support will not handle most issues that may come up during your loan process.
LendingTree does not provide sample rates for VA loans specifically. However, you can use the online marketplace’s mortgage comparison tool to check potential rates.
For more details read our full review of Lending Tree.
- Minimum credit score is 580
- “I CAN” loan offers customizable loan terms
- Buydown option to lower interest rate for first 1-3 years
- No interest rate or APR info publicly available
- Must enter contact info to get rate estimates
HIGHLIGHTS
- Sample rate
- 6.250% (6.563% APR) with 3 points purchased on a 30-year fixed-rate for a purchase loan of $726,200
- Minimum credit score
- 580
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- All 50 U.S. states
- Pre-approval time
- Within 24 hours
- Mobile app
- Yes
- NMLS ID
- 6606
Why we chose it: New American Funding is our top pick for low credit score requirements for VA loans. While its 580 minimum credit score requirement is not unique on the list, it has a vast selection of mortgage loans. Beyond the VA Purchase Loan, there’s also a VA Native American Direct Loan, VA Energy Efficient Mortgage, VA Streamline Refinance Loan and VA Cash-Out Refinance.
Notably, it offers what NAF refers to as an “I CAN” loan, which allows you to choose a custom fixed loan term between eight and 30 years. It also offers a “buydown mortgage” option for VA loans, which allows borrowers to reduce the interest rate on their mortgage for the first one to three years of their loan.
To get a quote, you must contact a representative online or by phone, which requires providing personal information — first and last name, email address and phone number.
For more detailed information, read our full review of New American Funding.
- Over 400 branches across 48 states
- Accepts credit scores as low as 580
- Offer specialized mortgages for physicians
- No branches in Alaska or West Virginia
- Rates not disclosed unless you call or submit an online form requesting a callback
- Phone customer service hours (M-F, 8:30 am-5 pm CST) may be too restrictive for some
HIGHLIGHTS
- Sample rate
- Unavailable
- Minimum credit score
- 580
- Minimum down payment
- 0% for qualifying borrowers
- Availability
- Licensed in all 50 U.S. states; in-person service available in ll U.S. states except Alaska and West Virginia
- Pre-approval time
- Undisclosed
- Mobile app
- Yes
- NMLS ID
- 2289
Why we chose it: Fairway Independent Mortgage’s presence in 48 out of 50 U.S. states makes it our top pick for in-person mortgage loan servicing.
Fairway Independent Mortgage is notable for its many branches across all but two U.S. states (Alaska and West Virginia), making it an ideal choice for individuals who prefer in-person service. The company offers VA mortgage loans with 100% financing if you have full VA entitlement.
A down payment will be required if you don’t have full VA entitlement or the loan exceeds the VA county limits. Like other VA loan lenders, Fairway Independent Mortgage also considers factors such as credit score and income when determining loan terms.
Fairway also offers a broad range of mortgage products which can be helpful for those who are unable to qualify for a VA loan. Among these loan products are specialized physician loans aimed at medical professionals still working through repaying their student loans.
For more detailed information, read our full review of Fairway Independent.
Other VA loan lenders we considered
While there are many mortgage lenders with outstanding products and features, they don’t necessarily have everything that could make them one of our top picks.
We reviewed the following lenders, and while they meet some of our criteria for “Best VA home loan lenders” (low rates, VA loan experience, good customer service), they ultimately didn’t make the cut.
Freedom Mortgage
- 550 credit score minimum is the lowest on our list
- Fully online loan process
- Variety of calculators and educational resources on their site
- Rates are only provided by calling for an estimate or signing up for online alerts
- High number of CFPB complaints
- Does not offer HELOCs
Why Freedom Mortgage didn’t make the cut: The lender has over 2,800 complaints lodged with the Consumer Financial Protection Bureau since March 2021. The Better Business Bureau has received over 1,200 complaints about the lender in the last three years and its accreditation was revoked.
Freedom Mortgage is a fully online lender that offers standard mortgage products such as conventional purchase and refinance loans, FHA, VA and USDA loans. What makes it stand out is its credit score requirement of 550 for VA loans, which is the lowest of any lender we considered.
Veterans First
- Fully online loan process, helpful for military members deployed overseas
- Educational resources
- Specializes in VA loans
- Higher credit score requirements than any lenders we’ve reviewed (mid-600s)
- Offers no home equity loans
- No rate information on its website
Why Veterans First didn’t make the cut: The higher-than-average credit score requirement (mid-600s) was a deciding factor in keeping it out of our top list.
Thanks to its fully online mortgage process, Veterans First (NMLS ID 449042) is a great choice for military members deployed overseas. Its focus on VA loans also means that the company is better prepared to attend to the specific needs of military members and veterans during the mortgage process.
Paramount Bank
- Origination fees waived for VA loans
- No prepayment penalties for VA loans
- No fee or rate information on its website
- No information on loan requirements on its website (minimum credit score, DTI, etc.)
Why Paramount Bank didn’t make the cut: Its general lack of upfront information about rates, fees and credit score requirements kept it out of our top lenders.
Paramount Bank (NMLS ID 551907) waives the lender’s origination fee ($1095) on all of its VA loans, making it an option worth considering. There are no prepayment penalties, either.
Flagstar Bank
- Considers credit scores as low as 580 for VA loans
- Collaborates with down payment assistance and other special mortgage programs
- Large selection of mortgage products for those who don’t qualify for a VA loan
- Branches located in only 28 states
- $75 annual fee for home equity line of credit (HELOC) loans
- High number of complaints with CFPB in the last three years (1,000+)
Why Flagstar Bank didn’t make the cut: Flagstar’s lack of branches in almost half of the U.S. and limited rate and fee information on its website kept it out of our top picks. For more details, read our full review of Flagstar Bank.
Flagstar Bank (NMLS ID 417490) is a notable mortgage lender thanks to its wide variety of mortgage loans offered and its collaboration with several special mortgage programs such as down payment assistance and home loan grants.
PNC
- Mortgage rate calculator allows for scenarios with credit scores as low as 620
- Individuals with credit scores under 620 may be offered alternative loan options
- Mortgage rates are only slightly above average (~0.2%)
- Relatively small selection of loan products
- No specialized VA loans
- Contact information and branch locations are not easy to locate
Why PNC didn’t make the cut: While full details aren’t available without speaking to an agent, PNC’s rate calculator shows rates slightly higher than many of our top picks.
PNC (NMLS ID 446303) has a standard offering of mortgage products, including conventional, FHA, VA, refinance and HELOC loans. PNC only offers a partially online loan application process. You can perform a digital income and asset verification, but you must speak with a loan officer to go over your loan details.
LoanDepot
- Strong focus on digital mortgage processing allows a fully online mortgage experience
- Over 200 affiliate branches nationwide
- Credit score minimums and loan eligibility criteria are not disclosed upfront
- Relatively small loan offering
- No HELOCs offered
Why LoanDepot didn’t make the cut: Its website doesn’t disclose credit score and other loan eligibility requirements. For more details, read our full review of LoanDepot.
LoanDepot (NMLS ID 174457) is a primarily online mortgage loan lender with several affiliate branches across the U.S. Its loan products include conventional purchase mortgages, FHA, VA, ARM (adjustable-rate) and 203k (FHA home renovation) loans. LoanDepot’s digital income and assets verification tools can significantly speed up the loan approval process in some cases.
Guild Mortgage
- Broad mortgage loan offering, including energy-efficient home mortgages
- Accepts down payment assistance programs
- Services its own loans
- Rates are only disclosed after reaching out to Guild
- No branches in IN, KY, MI, MN, MS, NY, or WV
Why Guild Mortgage didn’t make the cut: No rate information is publicly available; you must contact Guild for details. For more information, read our full review of Guild Mortgage.
Guild Mortgage (NMLS ID 3274) offers a variety of mortgage options beyond VA loans, including bridge mortgages that can help you sell your current home while shopping for a new one and energy-efficient mortgages.
Guild is also a good choice for people who prefer in-person service, since they have branches in all but seven U.S. states. Notably, Guild services its loans, which is something that not all mortgage loan originators do.
Guaranteed Rate
- Housing market research tool available
- Home valuation tool available
- Credit scores as low as 580 accepted for VA loans
- Conventional mortgage rates are higher than average (around 0.7% higher)
- Limited offering of VA loan products
Why Guaranteed Rate didn’t make the cut: Its VA loan product offerings are limited.
Guaranteed Rate (NMLS ID 2611) is a mortgage lender that allows borrowers to fully process their loan applications online, from start to finish. Individuals who prefer in-person service can also go to one of its 500+ locations across 46 states.
Movement Mortgage
- Offers several high-balance mortgage products (jumbo loans)
- Considers credit scores as low as 580 for VA loans
- Down payment assistance options available
- Streamlined underwriting process that can close loans in as little as a week
- Mortgage rates can only be obtained after contacting Movement
- No 24/7 customer service
- No physical locations
Why Movement Mortgage didn’t make the cut: Rate information isn’t publicly available to potential borrowers; you must contact the company for details. For more information, read our full review of Movement Mortgage.
Movement Mortgage (NMLS ID 39179) is an online mortgage lender that claims to be able to fully close on a loan in under two weeks, though these results will depend on each borrower’s situation. Notably, Movement considers credit scores as low as 580 for VA loan applications, well under the VA’s suggested 620.
Besides its VA loan products, Movement also has several down payment assistance and high-balance mortgage options, which are helpful for individuals looking to purchase in high cost-of-living areas.
NBKC Bank
- Provides nationwide mortgage service, despite being a regional bank
- Mortgage rate calculator allows credit scores in the 300s
- Offer specialized mortgages for pilots
- Only four branches split between Kansas and Missouri
- Mortgage rates can be as much as 1.5% higher than our top picks
- Mortgage rate calculator is not easy to access
Why NBKC Bank didn’t make the cut: Its VA loan rates are a bit higher than those of our top picks. For more details, read our full review of NBKC.
NBKC Bank (NMLS ID 409631) is a Kansas/Missouri regional bank that extends its mortgage services nationwide. While its loan offerings are standard (conventional, FHA, VA), it offers specialty home loans for pilots.
Notably, it is one of the few lenders that allows customers to obtain mortgage rates for credit scores under 500, although you’re not guaranteed results below that threshold. Its mortgage rates are also considerably higher than average (up to 1.5% higher).
VA Loans Guide
A VA loan is a home loan issued by private lenders and backed by the U.S. Department of Veterans Affairs (VA). Read on to learn more about VA home loans, their pros and cons, the associated costs and how to apply.
How does a VA loan work?
VA loans are one of the main benefits the government provides to active duty and retired members of the armed forces. Eligibility will depend on the borrower’s years of service. There are also property requirements that must be met. Read more on VA loans to find full details and see how a VA loan can help you achieve your homeownership goal.
Beyond military service requirements, some VA loan lenders require specific standards of creditworthiness. These details will vary by lender, but can include a credit score of 620 or higher and a debt-to-income ratio of 41% or less. (You can calculate your specific percentage using our debt-to-income ratio calculator.)
VA loans offer two big advantages for qualifying homebuyers. There is no required down payment, and the mortgage rates tend to be lower than those on conventional mortgages or FHA loans. Both of these features make a VA loan a more affordable financing option, especially for first-time homebuyers.
The VA no longer places maximum loan limits, but your VA mortgage lender might. In most U.S. counties, the maximum loan amount for 2024 is $766,550, but it can be as high as $1,149,825 in more expensive areas. Jumbo loans will have a higher limit.
Types of VA loans
The U.S. Department of Veterans Affairs offers four different types of mortgages — VA purchase loan, interest rate reduction refinance loan (IRRRLs), cash-out refinance loan, and Native American direct loan — each with its own set of requirements and limitations. Evaluate all loan options before deciding which best VA mortgage lender suits your needs.
Purchase loan
Purchase loans are used to finance the buying of a primary residence, make energy-efficient upgrades to an existing home or buy property to build a house. They cannot be used to buy investment properties, vacation homes, rental properties or fixer-uppers in need of significant repairs.
To learn more, read our guide on VA purchase loans.
Interest Rate Reduction Refinance Loan (IRRRL)
Designed to refinance an existing VA mortgage, a streamlined refinance can get you a lower interest rate, reduce the loan term, or go from a variable-rate to a fixed-rate mortgage.
Cash-out refinance loan
A VA cash-out refinance allows you to access the equity you’ve built up in your home by applying for a new mortgage with a higher balance. The proceeds of the new loan will pay off your old mortgage and you’ll receive the excess amount in the form of a lump sum payment.
Learn more about how to tap into your home equity with a VA cash-out refinance or read our guide on on how to refinance a VA loan to get more information on refinancing.
Native American Direct Loan (NADL)
NADL is the only VA loan managed and funded directly by the government entity. Veterans who are Native American (or whose spouses are Native American) are eligible for this loan. Borrowers can use this loan to buy, build, or improve a home on federal trust land.
As of this writing, there is no limit to the amount of money that can be borrowed with this program (aside from the limitations imposed by creditworthiness, DTI, and general Fannie Mae/Freddie Mac conforming limits, though borrowers can access higher limits if they choose to make a down payment).
Additional VA-backed loan programs
VA Energy Efficient Mortgage (EEM)
Finance energy efficient home improvements, such as a solar water heater, solar panels, storm doors on windows and furnace efficiency modifications, through an EEM. Ineligible home upgrades include A/C units, vinyl siding and new roofing or shingles.
VA renovation loan
Also called a VA rehab loan or a reno loan, a VA renovation loan is a way to include the cost of home repairs and improvements in your VA home loan amount. No luxury upgrades are allowed. This loan is intended for repairs such as heating and cooling system replacement, upgrades to make the home more accessible for people with disabilities and the replacement of old appliances.
VA loans for manufactured homes
You can get financing for a manufactured home, also known as a mobile home or a modular home. However, there is a 25-year maximum loan term on larger units, and a 20-year loan term limit on smaller units. Lender credit requirements for VA mobile home loans may also be higher than loans for conventional homes. The mobile home must also have a permanent foundation and comply with safety standards set by the U.S. Department of Housing and Urban Development (HUD).
To explore other home loan options or check out current mortgage rates, our page of the best mortgage lenders can be an excellent place to start.
There are specific requirements you must meet to qualify for a VA home loan.
How to qualify for a VA Loan
There are specific requirements you must meet to qualify for a VA home loan.
The VA home loan program and its military benefits are available for:
- Active-duty military members
- Veterans
- Past and present members of the National Guard
- Surviving spouses of military personnel who died in combat
A VA home loan does not have a minimum credit score requirement, but most participating VA loan lenders require a minimum credit score of 620. Our advice? Always check your credit report and debt-to-income ratio before applying for a loan and improve it if you can. (Be sure to read our guide on how to dispute your credit report.)
Service requirements
VA loan eligibility depends on the length of service of the applicant. These are the requirements as set by the VA:
- Veterans and active-duty service members must have served at least 90 days during wartime or 181 days during peacetime.
- National Guard members must have served at least 90 days of active-duty service during wartime or six years of creditable service in the Select Reserves or Guard.
- Two kinds of discharges from military service may affect eligibility determination: Other Than Honorable (OTH) and Bad Conduct.
- The specific circumstances of a veteran’s discharge will be considered, which could take Veterans Affairs (VA) months to evaluate.
In all cases, once deemed eligible, you must apply for a Certificate of Eligibility (COE). The COE proves to the VA mortgage lender that you meet the VA’s eligibility requirements.
How to apply for a VA home loan
After confirming eligibility for a VA loan, take the following steps to apply:
- Shop around for a lender and compare rate quotes before settling on the one that best fits your needs.
- Submit your loan application. The lender will request a VA appraisal of the house. The lender reviews the appraisal, your credit history and income and decides if it accepts your loan application.
- Apply for your COE and contact your state’s regional VA loan center to start the process directly with the government, in the case of Native American Direct Loans.
Once your lender accepts your application, they’ll work with you to select a title company (or entity) to close on the house.
If you have any questions that your lender can’t answer, please call your VA regional loan center at 877-827-3702. You can also watch a video on the official U.S. Dept. of Veteran Affairs’ YouTube page to learn more about VA home loans and how to apply.
How to get a VA loan with bad credit
Some lenders will issue a VA loan to veterans and service members with credit scores as low as 580 or lower. Freedom Mortgage, for example, will accept a credit score as low as 550. However, most lenders will require a minimum credit score of 620.
If you don’t meet the minimum credit score required, you should work on improving your personal finances. Paying the bills on time, paying off any debt you currently have and contacting the reporting agency to fix any errors are some steps that can help improve your score.
More About VA Mortgage Loans
Best VA Loan Lenders FAQs
What is a VA home loan?
A VA loan is a no-down-payment mortgage military benefit partially backed by the Department of Veterans Affairs (VA). Borrowers can use the loans for the purchase of a primary residence or to refinance an existing mortgage.
Who qualifies for a VA loan?
To qualify for a VA loan, you or your spouse must meet the basic service requirements set by the Department of Veterans Affairs (VA), have a valid Certificate of Eligibility, and meet the lender’s income and credit requirements.
How many times can you use a VA loan?
You can use a VA loan more than once but only to purchase or refinance a principal residence, provided you meet the availability requirements. However, you may be able to use a partial entitlement for a second loan if you haven’t used it all on your first mortgage. Remember that using a partial entitlement may mean you’ll need to shell out a down payment and a higher VA funding fee.
Are VA loans assumable?
Because VA loans are backed by the U.S. government, they can be assumed by a new lender even if they are not active military or veterans. In order to assume a VA loan, the new borrower must have a minimum credit score of 580, a DTI of 45% or lower, pay the VA funding fee and ensure the home will be their primary residence. In some cases, a down payment may also be required.
How long does it take to close a VA loan?
VA loans typically take a little longer than a traditional mortgage loan to close. Although the experience may vary from one person to another, VA loans take about 50 to 55 days to close on average. However, it is possible to close on a VA in as little as 30 days in some cases.
Does a VA loan require mortgage insurance?
No, VA loans do not require private mortgage insurance or any other type of mortgage insutance that is required by other loan types, such as conventional and FHA loans. The lack of an insurance requirement is one of the main benefits of obtaining a VA loan, along with not having to make a down payment.
Do VA loans have closing costs?
Yes, VA loans have closing costs, which can amount to 3% to 6% of the loan amount. These costs include fees associated with the loan origination and underwriting, title insurance and recording fees and the VA appraisal fee, among others. The VA funding fee, which ranges between 1.25% and 3.3% of the loan amount, is also due at closing but can be rolled into the loan. The home seller can pay up to 4% of the closing costs on a VA loan.
How We Chose the Best VA Loan Lenders
Given that many mortgage lenders offer similar products across the board, we narrowed our search criteria to three factors: rates, experience and customer service.
- Rates – We chose VA loan lenders that offered the lowest rates to ensure your mortgage payments fall in line with your budget.
- Experience in VA Loans – We prioritized VA mortgage lenders that process many VA loans. Having a VA mortgage lender who is familiar with this process ensures that every step of your home purchase is taken care of on time.
- Customer Service – We highlighted VA mortgage lenders that excel in customer satisfaction and provide first-time homeowners step-by-step guidance throughout the pre-approval, application and loan closing.
We also made sure that our picks are registered with the Nationwide Multistate Licensing System and Registry (NMLS) and meet the minimum certification requirements for mortgage lending.
Though we always try to include accurate and up-to-date information on regulatory and legal actions, we don’t claim this information is complete or fully up to date. Interest rates and annual percentage rates are subject to change. As always, we recommend you do your own research as well.
Summary of Money’s Best VA Home Loan Lenders of April 2024
Source: money.com
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Mortgage rates are down significantly this week. Average 30-year mortgage rates have dropped nearly 30 basis points from a week ago, according to Zillow data. And they could drop further this year.
As inflation slows and the economy comes into better balance, mortgage rates are expected to go down. Inflation has been a bit stickier than expected over the last few months, but Federal Reserve officials have indicated that they still believe it will continue to slow and enable them to start lowering the federal funds rate this year. This should take a lot of upward pressure off of mortgage rates and allow them to decrease.
Right now, investors are pricing in a Fed cut in June, according to the CME FedWatch Tool. So we could see mortgage rates start trending down more substantially in just a few months.
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Current Refinance Rates
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Mortgage Calculator
Use our free mortgage calculator to see how today’s mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you’ll also understand how much you’ll pay over the entire length of your mortgage.
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Your estimated monthly payment
- Paying a 25% higher down payment would save you $8,916.08 on interest charges
- Lowering the interest rate by 1% would save you $51,562.03
- Paying an additional $500 each month would reduce the loan length by 146 months
Click “More details” for tips on how to save money on your mortgage in the long run.
Mortgage Rates for Buying a Home
30-Year Fixed Mortgage Rates Fall (-0.27%)
The current average 30-year fixed mortgage rate is 6.32%, down 27 points from where it was this time last week, according to Zillow data. This rate is also down compared to a month ago, when it was 6.59%.
At 6.32%, you’ll pay $620 monthly toward principal and interest for every $100,000 you borrow.
The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.
20-Year Fixed Mortgage Rates Go Down (-0.24%)
The average 20-year fixed mortgage rate is 24 points down from where it was last week, and is sitting at 5.99%. This time last month, the rate was 6.30%.
With a 5.99% rate on a 20-year term, your monthly payment will be $716 toward principal and interest for every $100,000 borrowed.
A 20-year term isn’t as common as a 30-year or 15-year term, but plenty of mortgage lenders still offer this option.
15-Year Fixed Mortgage Rates Decrease (-0.33%)
The average 15-year mortgage rate is 5.64%, down from last week. It’s also down compared to this time last month, when it was 5.98%.
With a 5.64% rate on a 15-year term, you’ll pay $825 each month toward principal and interest for every $100,000 borrowed.
If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.
7/1 ARM Rates Plunge (-0.60%)
The 7/1 adjustable mortgage rate is down 60 basis points from a week ago, currently at 6.18%. It’s also down from a month ago, when it was at 6.47%.
At 6.18%, your monthly payment would be $611 toward principal and interest for every $100,000 borrowed — but only for the first seven years. After that, your payment would increase or decrease annually depending on the new rate.
5/1 ARM Rates Drop Nearly Half a Percentage Point (-0.49%)
The average 5/1 ARM rate is 6.51%, a 49-point decrease from last week. It’s down from where it was a month ago, when it was 6.74%.
Here’s how a 6.51% rate would affect you for the first five years: You’d pay $633 per month toward principal and interest for every $100,000 you borrow.
30-year FHA Rates Nearly Flat (+0.03%)
The average 30-year FHA interest rate is 5.65% today, which is just 3 basis points up from last week. This rate was 6.11% a month ago.
At 5.65%, you would pay $577 monthly toward principal and interest for every $100,000 borrowed.
FHA mortgages are good choices if you don’t qualify for a conforming mortgage. You’ll need a 3.5% down payment and 580 credit score to qualify.
30-year VA Rates Lower (-0.38%)
The current VA mortgage rate is 5.54%, 38 basis points lower than this time last week. This rate was 5.92% a month ago.
With a 5.54% rate, your monthly payment would be $570 toward principal and interest for every $100,000 you borrow.
Mortgage Refinance Rates
30-Year Fixed Refinance Rates Increase (+0.69%)
The average 30-year refinance rate is 7.69%, 69 basis points higher than last week. It’s nearly flat compared to a month ago, when it was 7.65%.
Here’s how a 7.69% rate would affect your monthly payments: You’d pay $712 toward principal and interest for every $100,000 borrowed.
Refinancing into a 30-year term can land you lower monthly payments, but you’ll ultimately pay more by refinancing into a longer term.
20-Year Fixed Refinance Rates Up Over a Full Percentage Point (+1.20%)
The current 20-year fixed refinance rate is 7.66%, which is 120 basis points up compared to a week ago. This rate was 6.42% this time last month.
A 7.66% rate on a 20-year term will result in a $815 monthly payment toward principal and interest for every $100,000 you borrow.
15-Year Fixed Refinance Rates Go Up (+0.58%)
The average 15-year fixed refinance rate is 6.92%, which is more than half a percentage point higher compared to last week. It’s down just a little bit compared to this time a month ago, when it was at 6.99%.
A 6.92% rate on a 15-year term means you’ll pay $894 each month toward principal and interest for every $100,000 borrowed.
Refinancing into a 15-year term can save you money in the long run, because you’ll get a lower rate and pay off your mortgage faster than you would with a 30-year term. But it could result in higher monthly payments.
7/1 ARM Refinance Rates Tick Down (-0.32%)
The average 7/1 ARM refinance rate is 6.83%, down 32 points from where it was last week. It’s up a bit from a month ago, when it was 6.69%.
Refinancing into a 7/1 ARM with a 6.83% rate means your monthly payment toward principal and interest will be $654 for every $100,000 you borrow. This will be the payment for the first seven years, then your rate will change annually unless you refinance again.
5/1 ARM Refinance Rates Fall Dramatically (-1.11%)
The 5/1 ARM refinance rate is 6.44%, which is significantly lower than it was this time last week. It’s up a bit compared to this time last month, when it was 6.34%.
A 6.44% rate will result in a monthly payment of $628 toward principal and interest for every $100,000 borrowed. You’ll pay this amount for the first five years of your new mortgage.
30-Year FHA Refinance Rates Drop a Bit (-0.10%)
The 30-year FHA refinance rate is 5.52%, which is 10 points lower than last week. This rate was 5.61% this time last month.
A 5.52% refinance rate would lead to a $569 monthly payment toward the principal and interest per $100,000 borrowed.
30-Year VA Refinance Rates Decrease (-0.19%)
The average 30-year VA refinance rate is 5.56%, which is down compared to where it was was last week. This rate was 5.78% a month ago.
At 5.56%, your new monthly payment would be $572 toward principal and interest for every $100,000 you borrow.
Are Mortgage Rates Going Down?
Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022. Mortgage rates also rose dramatically in 2023, though they started trending back down toward the end of the year. Though rates have been somewhat elevated recently, they should go down by the end of 2024.
For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease further. Check out some of our best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
Source: businessinsider.com