Mortgage Term Rate Considerations for Military Personnel

Posted by Lauren Schneider on Monday, November 16th, 2020 at 9:46am.

A Mortgage Term Rate Breakdown for Military PersonnelMortgage term rates are not clear-cut, and there are many factors considered when a mortgage product lender offers specified terms and rates. Military personnel may find themselves with more options, as lower mortgage term rates could be tied to unique mortgages such as VA loans. That being said, not everyone may qualify for the lowest rates.

Is it better to take out a conventional loan or a VA loan? What is best with a sizeable down payment? Speaking to a mortgage lender directly is helpful. However, the following information includes a few important takeaways when it comes to mortgage term rates as they apply to reservists, veterans, and their spouses.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

Mortgage Term Rates Explained

A mortgage loan borrower promises to pay back the loan taken from a lender plus interest. The rate of interest on a mortgage loan product is known as the mortgage term rate. The lender gets to decide on the mortgage rate based on multiple factors. One of the most important is one's credit profile. An applicant's good or great credit rating can make for a lower mortgage term rate. However, if an applicant is determined to have a high likelihood of defaulting on a loan, a lender will offer a higher mortgage term rate. Other factors a lender considers when determining a mortgage term rate include:

  • Current market conditions
  • Loan duration
  • The type of loan

Borrowers can choose from fixed- or variable-rate mortgage loans. A fixed-rate loan will have a mortgage rate that will remain the same for the life of the loan. As an example, a 30-year fixed VA purchase loan may have an interest rate of 2.25 percent. This interest rate will not change, as long as the borrower is paying the loan. A variable mortgage rate can change over the lifetime of the loan. With some mortgage loan products, a borrower may refinance their loan for better rates once they have established sufficient equity in their home.

In general, lower interest rates are available with a VA loan, rather than with a conventional loan. It is also rather easy for a borrower to refinance with a VA Interest Rate Reduction Loan when rates drop. This is one of the benefits of getting a mortgage loan guaranteed by the VA.

Mortgage Term Rates on a Conventional Loan

Military personnel and their spouses may find that a conventional loan will be their best bet. It is possible for a borrower to get low rates when they can make a down payment of 20 percent and have a solid credit history. Such borrowers do not need the addition of private mortgage insurance (PMI).

Mortgage Term Rates on a VA Loan

Not everyone can make a sizeable down payment. VA mortgage loans and their relatively low rates are great ways to get on the path of affordable homeownership for those who qualify. VA loans do not require:

  • A down payment
  • Private mortgage insurance
  • A VA one-time funding fee (in specific situations such as getting VA compensation related to a service-connected disability)

This can make paying upfront expenses easier for new homeowners. However, approved VA loan borrowers must follow VA occupancy rules and be ready to move into a home within a timeframe of 60 days after the closing of the loan.

Mortgage Term Rate Questions

Military personnel and their spouses may want to know more about the variety of mortgage loan products and their term rates. Conventional loans and VA loans are only a few of the options available. Good mortgage term rates may be available for conventional and VA loans. Because every person's situation is unique, it is best to speak directly to a mortgage loan lender about their products and recent mortgage term rates.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

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