What are VA home mortgage rates? Are these rates set by the VA or can a mortgage co. charge higher rates.?
Posted by admin | Under VA Mortgage Friday Oct 17, 2008My son has apply for a VA home mortgage through lending tree.The mortgage co. is Mortgage Now. The VA website has a interest rate listed at 6.000%, for VA loans, but the interest rate charged by Mortgage Now is 6.875. Can the Mortgage Co. charge a higher interest. The good faith estimate had 6.8, they were told that was just an estimate and that would be the most they would be charged. They are to close soon and the closing settlement charges have the interest rate @6.875. Can they charge a high rate than the VA has on their site.
Yes, they can. The Veterans Administration does not actually make loans. They act as an insurance company. The money comes from the bank but the loan has an insurance policy in the form of the VA funding fee you pay to obtain the loan. This funding fee covers the insurance for the bank with the VA and insures that in the event of a default by your son, the bank will be able to get most of their money back. This insurance is what makes the loan a VA loan. Without it, the loan is considered a conventional loan and your mortgage company would then obtain the insurance through a private mortgage insurance company (PMI).
Consequently, the rate charged by the institution is at their discretion. however it must be within reason or the VA may not allow them to continue making VA loans. 6.875 is somewhat high right now for a typical VA loan. I would question this with the lender. There may be a reason for this, but without reviewing your file, I have no idea on what that may be.
The VA website might be from a different lender who does not lend where your son is buying. Or your son might now have 20% down and good credit. There are lots of reasons for the higher rate. As long as your son can afford don’t worry too much about the rate difference. VA loans only are for veterans but do not mean better interest rates or loans from the government. The perk is that there is no PMI monthly so he saves money. It sounds like a good deal.
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Long time loan officer
Yes, they can. The Veterans Administration does not actually make loans. They act as an insurance company. The money comes from the bank but the loan has an insurance policy in the form of the VA funding fee you pay to obtain the loan. This funding fee covers the insurance for the bank with the VA and insures that in the event of a default by your son, the bank will be able to get most of their money back. This insurance is what makes the loan a VA loan. Without it, the loan is considered a conventional loan and your mortgage company would then obtain the insurance through a private mortgage insurance company (PMI).
Consequently, the rate charged by the institution is at their discretion. however it must be within reason or the VA may not allow them to continue making VA loans. 6.875 is somewhat high right now for a typical VA loan. I would question this with the lender. There may be a reason for this, but without reviewing your file, I have no idea on what that may be.
References :