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Are Conventional Mortgage Rates Better Than Va Rates?

By Kevin Landis

Mortgage rates fluctuate daily, but for the first time in years, conventional mortgage rates have reached record lows. Mortgage rates across the board are incredibly low for many major mortgage lenders. Perspective homeowners and current homeowners seeking refinancing can benefit from historically low conventional mortgage rates. However, when comparing VA mortgages to conventional mortgages, VA mortgages provide a few benefits conventional mortgages fail to offer.

Current Conventional Mortgage Rates

According to the Mortgage Bankers Association (MBA), recent mortgage application volume soared, thanks in part to low conventional mortgage rates. According to the MBA the average mortgage rate for a 30-year fixed-rate mortgage hovers around 4.80 percent and the average rate for a 15-year fixed-rate mortgage hovers between 4.23 to 4.26 percent.

Pros and Cons of Conventional Mortgage Rates

Obtaining a conventional mortgage has always been challenging and anyone watchful of the current mortgage market knows it’s even harder these days despite historic lows. Traditionally, conventional mortgages are ideal for borrowers able to afford a 5 percent or higher down payment in addition to maintaining an excellent credit rating. Conventional mortgages have always required higher down payments in comparison to government-backed mortgages like VA mortgages. In dismal markets, such as the current one, borrowers may only receive 90 percent mortgage-to-value meaning borrowers have to furnish the additional 10 percent out of pocket. Some lenders may even demand as much as 20 percent down, especially in market sectors where obtaining mortgage insurance poses challenges, such as condominiums. However, conventional mortgages require fewer bureaucratic hurdles than VA mortgages. Thus conventional mortgages are easier and quicker to get provided borrowers meet credit and down payment requirements. Additionally, because conventional mortgages typically call for higher down payments, home equity builds faster in comparison to VA mortgages.

Benefits of VA Mortgages over Conventional Mortgages

Current VA mortgage rates for a 30-year fixed-rate mortgage stands at 4.31 percent and 3.90 percent for a 15-year fixed-rate mortgage. VA mortgages are usually easier to obtain for borrowers with less than stellar credit ratings and little to no cash for a down payment. Most VA mortgages offer 100 percent financing with no mortgage insurance, which equates to a tax deductible interest payment. If a Veteran or active duty service person qualifies for a VA mortgage, it may be in their best interest to take advantage of the benefit’s the government provides. While conventional mortgage rates do not vary drastically in comparison to VA rates, VA mortgage rates are comparable to conventional mortgages where the borrower has an adequate credit rating and adequate cash for a down payment.

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