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Updated almost 9 years ago, 02/10/2016
VA Loan: Worth Shopping Around?
So, we're active duty military and looking at using our VA loan at our next station, Sheppard AFB in Texas. Been looking around at rates and I'm getting rates between 3.6-4% It seems that there are a lot of fees that are fairly standard (I know the VA funding fee is fixed and other costs seem to be similar between a few loan estimates I've received).
Aside from interest rates, is it really worth shopping around different lenders and will I save that much? Is the main difference a few hundred dollars in various closing costs or will rates vary significantly between lenders? If costs are fairly standard, probably best to go with the highest quality lender. Anyone have any recommendations?
I also go with my high quality lender who will make it happened. I find that is beyond important. I have made thousands because my deals go through and others just reminiscent on what would have happened had their loan closed ;)
PS - LOVED the VA loan. Used it twice.
@Richard Cook I agree with @Elizabeth Colegrove, VA loans are absolutely awesome. They can be a phenomenal deal. That said, it doesn't hurt to shop a few lenders to get comparisons, but you also want to work with a lender that can get it done. If you save a tiny percentage on the rate, but the lender is a nightmare to work with, it may not be worth it. There's probably a bunch of people on BP who can give good recommendations for lenders to work with.
Also, if you're likely to be in the new home for only a few years, go with a VA loan that has a slightly higher rate and have the lender cover more of the closing costs. If it's likely you'll be in the home for quite a few years (7 years or more, for instance), a lower rate and higher closing costs might pencil out a little better over the long term.
Have your lender of choice run a few different rate scenarios (for example 3.625%, 3.875%, 4.125%, etc.) along with the closing costs for that rate. Sometimes you can take just a 0.125% bump in the rate and get a substantial jump in lender credit that the lender can use to cover thousands in closing costs. You're looking for that "sweet spot" between rate and costs where you get the most bang for your buck.
You want an experienced VA lender. The small amount of interest you save will be more than made up by the lack of hassles you will get using a VA lender who has done this before.
VA has lower credit/income/asset standards than any other loan program, paired with the best rates hands down.
That is paired with the HIGHEST standards for the property in question. With those lower credit/income/asset standards and low rates, something's got to give to make up for it... and that thing is the condition of the property.
What does that mean?
It means that what's going to save you a few grand in "Surprise! Fix all this stuff!" closing costs is a lender that can & will answer your "will this be an issue using VA financing?" questions while you're at the property on your cell phone talking to him on Saturday at 3 pm.
Thanks for the awesome advice everyone, so what I'm hearing is yes rates may fluctuate between lenders but not so much that it is ever going to be worth going with someone because they're cheaper (due to initial hurdles in VA loan process). Primary decision factor should be quality of service and references. If anyone has any recommendations of lenders, I've already checked out a few but am always looking for more! Anyone have any experience with Veterans United? I'm leaning towards them right now! Thanks!
-Dan
Ohio famously has all the astronauts, I've got to imagine it also has a lot of veterans :) . Ask around for local referrals. Ask your Ohio veteran buddies questions about the condition of the property, and how the person doing the loan handled it.
I suggest NOT going with whatever rando picked up the phone when you called 1800-veterans-united or whatever. That call center gal or guy could be anywhere on the bell curve, bottom 10% for all you know. You want a specific individual (not a company) that you have reason to believe is competent.
Hi Dan,
I thought I'd chime in since you specifically asked about Veterans United Home Loans.
I actually work at Veterans United doing real estate agent education. We've got some really knowledgeable loan officers and we really pride ourselves on customer service. We've got a 96% customer satisfaction rating. We'd love the opportunity to earn your business.
And if you ever have VA loan questions, feel free to reach out to me and I'll do my best to answer them.
Samantha
check out Navy Federal Credit union
Originally posted by @Richard Cook:
So, we're active duty military and looking at using our VA loan at our next station, Sheppard AFB in Texas. Been looking around at rates and I'm getting rates between 3.6-4% It seems that there are a lot of fees that are fairly standard (I know the VA funding fee is fixed and other costs seem to be similar between a few loan estimates I've received).
Aside from interest rates, is it really worth shopping around different lenders and will I save that much? Is the main difference a few hundred dollars in various closing costs or will rates vary significantly between lenders? If costs are fairly standard, probably best to go with the highest quality lender. Anyone have any recommendations?
I also recommend hiking the rate up to absorb the 2.15% VAFF (VA Funding fee) if you're using VA just because this fee is effectively 2.15 points you're paying to the VA for no monthly MI. By default this VAFF is financed into your loan so at the time of closing your 100% loan (because VA is 0% down) is effectively 102.15% loan to value (ratio of loan to the value of your home/property).
The reason I say this is because after 6 months of payments you can do a VA IRRRL (interest rate reduction refinance loan) and the VA FF on a VA to VA loan is only .50% so you'll be able to most likely lower your rate in between the two loans and get away from paying both VAFF on the purchase loan and the refinance (VA IRRRL) loan as well there by saving you the 2.15 pts upfront.
Yes, there is a bit of interest rate risk however to avoid 2.15% points upfront into your loan is huge, and the strategy may very well be worth it and is worth it for most (I've done many of these succesfully).
If you structure your VA loan correctly in unison with a RE agent whom is a good negotiator you may pay no VA FF or closing or prepaids as well.
I would just be careful of this first time use VAFF, second time use is as high as 3.30% so for those vets looking to use their entitlement the second time its definitely a hefty fee and most just finance this fee because they dont know any better strategies around it.
Hey all, thanks for the great info - think I'll be going with our local lender. It's about .5% higher APR than if I competitively shopped and perhaps a few hundred in extra CC but if it closes, and closes quicker, it will be worth it.
@Albert Bui - that's a great idea that I hadn't considered the possibility of that tactic using the IRRRL and the .5%. I knew that VAFF went up for subsequent uses, so would just have to plan to have a good enough down payment to lower that. We have enough to put down we might even just pay the VAFF out of pocket, help avoid a situation getting us upside down.
I appreciate all the advice from people on banks to use - it's nice to have so many choices but also so overwhelming - it got me thinking how the internet has changed how we do business. If this were 20+ years ago, I'd just go to my local bank that I did all my business went, take their loans, and never think twice about if I got a good rate or closing costs!
Its important you structure your loan most effectively. Its more important than rate because while the 2.15% or 3.30% doesnt sound like much its very easily avoidable to structure the loan to absorb these costs with out adding them to the loan amount (financed) if you know what you're doing.
Its a balance between risk and reward but if we know the game plan its easy to greatly reduce risk while upshoring lots of upside, especially for your VA loan.
Anyone can get a VA loan done but the difference is getting it done with the most efficiency so that you can supercharge your finances.
Great question... It is important to shop, because even if lenders are in the same RANGE due to the market, there are differences in pricing depending on their margins. That is, the money that they make on the loan. BUT - that doesn't mean you go with the cheapest. I am not the cheapest in San Diego, but we get loans done in a way that is SUPER high quality, high touch, etc. It takes staff to do that. There are cheaper options, but the guy down in the van by the river doing loans is not your best bet.
THE BEST WAY TO SHOP is like this. DONT look at a good faith estimate. It will confuse you, and is easily manipulated. Same thing with APR. What you want to do is look at RATE and LENDER fees. Not third party fees, appraisals, etc, but LENDER fees. Some lenders may have a lower rate, but much higher lender fees. Some lenders have slightly higher rates but lower lender fees.
What you should do is stay away from the internet, etc, and find a friend or mentor who has purchased a home previously and has a 100% solid referral. Find someone who had a great experience and ask for a referral. All internet stuff (including Navy Fed and USAA) turns you into a "lead" and when you are a lead, it really doesn't matter if you are treated incredibly well, because there are always other "leads" inbound. If you are REFERRED to someone who is 100% referral based, there is fire to their feet, because to be referral based you have to deserve and work for those referrals.
My two cents...
Daniel