When you’re talking about most things, a fraction of a percent doesn’t matter much. But when it comes to the interest rate on a loan, even a sliver of difference can add up to thousands in savings. 

You can use our VA mortgage calculator to see for yourself. Say you want to borrow $400,000 to buy a house with a 30-year fixed-rate VA loan. If you get a 5.7% interest rate, your monthly principal and interest payment will be $2,372. 

But if you can get your VA loan rate down to 5.6%, that drops to $2,346. That’s $26 a month back in your pocket. In one year, you’d save $312. And after the full 30-year loan term, that amounts to almost $10,000 ($9,360, to be precise). 

Long story short, even a little downward movement on your VA loan rate can make a big difference. Fortunately, you have control over some of the factors that go into determining the rate you get. 

If you want to put work into getting a lower VA loan rate, you need to know where to direct your energy. With that in mind, let’s go over the factors that lenders consider when determining VA rates. 

Broad-reaching factors that shape VA loan rates

These factors aren’t under your control, but you don’t have to be blindly blown about by them, either. Knowing what’s going on with the market and different lenders can help you make strategic moves to get the best VA loan rate. 

The main general factors behind these rates are:

Market forces

Mortgage rates — including VA loan rates — change in response to specific parts of the economy. The inflation rate and the gross domestic product (GDP) both play a role. So does the current yield on 10-year Treasury bonds and the federal funds rate set by the Federal Reserve. 

All of this to say: when market rates rise, VA rates tend to go up with them. The reverse is also true. If you’re not in a hurry to buy, watching VA loan rates can help you strike while the iron is hot. 

The VA’s backing

Here’s the good news: no matter what’s going on with the economy, lenders like loans backed by the Department of Veterans Affairs. And that means lower rates. 

Because the VA stands behind VA loans, lenders have a guarantee they’ll make at least some of their money back if you don’t repay what you borrow. That lowers risk for the lender. And lenders charge less in interest for lower-risk loans. 

Differences between lenders

Different lenders weigh rate-setting factors differently. Each company has its own algorithm for determining a loan’s interest rate. 

That means you can apply for a VA loan with three different companies and get different rates at each of them. That’s why comparing offers pays off — literally. 

Factors specific to you that lenders use to determine VA loan rates

Lenders take a long, hard look at your finances before they decide to approve you for a VA loan. They’re looking for indicators that you’re likely to repay what you borrow. The more probable it seems that you’ll repay in full, the more comfortable lenders will feel offering you a lower interest rate.

To decide your likelihood of repayment, they typically look at:

Your credit score

Your credit score is essentially a numerical summary of how good you’ve been at managing your money. With that three-digit number, lenders can see how consistent you’ve been about paying off credit cards, meeting debt obligations for car and student loans, and more. 

If your credit score isn’t in the good range right now, take some steps to improve it. That starts with making sure you’re always paying your bills — including the minimums on any credit cards — on time. 

It also helps to request a copy of your credit report and go over it. If you spot any discrepancies, clearing them up helps to give your score a quick boost.  

The size and term of the loan

Lenders are in the risk-management game. While there’s no dollar cap on how much you can borrow with a VA loan, going too high means paying more in interest. 

The more you’re borrowing, the higher the likelihood you won’t be able to repay it. As a result, a larger loan balance usually means a higher interest rate.

That might make it worth it to put some money down. You can get a VA loan with a 0% down payment. But any money you pay upfront lowers your loan balance, and that can help to lower your interest rate. 

Similarly, lenders see shorter-term loans as lower-risk. They consequently usually offer lower rates for them. If you can afford the monthly payment with a 15-year loan, for example, you’ll probably get a lower interest rate than with a 30-year loan for the same amount. 

Your financial situation

The VA requires lenders to look at your cash flow. They can’t offer you a loan if you don’t have enough residual income. That basically means you can pay your bills, including your mortgage and still have enough money left over to live. 

The residual income piece also helps to shape your interest rate. If you have a higher income and/or less debt, you’re more likely to get a lower VA loan rate.  

Some factors that determine VA loan rates are out of your hands. But others are firmly within your grasp. By working to improve your credit score and financial situation, then shopping rates with multiple lenders, you can likely get a good deal on your mortgage. To start comparing VA loan rates today, use our live rate table.