What the Rising Mortgage Interest Rates Mean for Veterans

Although you might initially think that rising mortgage interest rates are bad news, there are actually some positives associated with this phenomenon — especially for people looking to utilize their VA loans.

Here’s how mortgage interest rates and home prices got to where they are, and if you want to become a homeowner, you’ll find a practical guide on doing so here. Keep reading!

Why Mortgage Rates are Rising

Rates have decreased since 2008 and remain at historic lows, despite their rapid increase in recent times. The cause of this shift was largely due to the Great Recession. To mitigate further financial failure on a global scale, the US government enacted Quantitative Easing—in layman’s terms, increasing money in the present economy. In order to do so, The Fed (AKA The Federal Reserve) bought mortgage-backed securities.

The natural question to ask here is where did the money come from? The Federal Reserve printed it. Without going too deeply into the mechanics of monetary policy, ultimately printing more money caused mortgage interest rates to go down. Various elements are working together to cause mortgage interest rates to rise, such as the end of US Quantitative Easing and an increase in federal funds rate.

The Cause of Rising Home Prices

The Great Recession saw a significant increase in foreclosures as well as an excess of developed homes relative to the number of buyers. This was further complicated by stricter mortgage lending standards making it more difficult for prospective homeowners to qualify.

Essentially, an oversupply of homes caused values to plummet. However, in the past few years, many of these homes have been bought, since they became affordable. Now, reduced availability has led to increased home prices. In many areas of the United States, buyers are now competing against each other for properties.

When is the Right Time to Buy?

Interest rates are known to constantly go up and down. Even though they have only been climbing as of late, they are still lower than they were fifteen years ago. Furthermore, when interest rates start to climb, this usually causes home price growth to slow down—making homes more affordable for people who want to buy a house.

A seller hands over the keys to a new home after receiving a mortgage application form

The Basic Steps to Buying a Home with Your VA Loan

Homeownership has always been a solid investment, and now is as good a time as any to enter the market. After all, rates and the market in general will fluctuate anyway. You should take advantage of the current rates, too, since they are at the same level as they were ten years ago, while it was still going down.

Begin your homebuying journey on the right foot by reading and following these easy steps to ensure you are making the most of your VA loan.

  1. Write up a list of VA loan providers and compare their rates. Not all VA loan providers are the same, so it’s important to compare rates and fees between lenders. When choosing a lender, be sure to select one with experience in handling VA loans.
  2. After you have gathered all the required documents, the next step is to obtain your Certificate of Eligibility from the VA. Some lenders also assist you with getting this or even get it for you themselves.
  3. Choose a Real Estate Agent familiar with VA loans to avoid any potential complications during the home-buying process. The VA loan includes unique elements, such as the appraisal process, so working with someone experienced in this type of purchase is essential.
  4. Find your dream home, and extend an offer to the seller. And don’t worry, a good real estate agent will be by your side every step of the way to help you put together an offer that stands out amongst the others and has a higher chance of being accepted in this competitive market.
  5. Next, your offer is accepted. This signals the start of a number of tasks that must be completed in order to successfully close on your home.
  • The lender will assess all of your income and debts in order to finalize the loan.
  • A VA representative will appraise the home to make sure that it is worth the value you are paying and that it meets all required conditions.
  • Get title insurance to protect you in case someone has a claim to the home
  • Get homeowners insurance which safeguards you from hazards like fire or hail damage. This is required by lenders.
  • You will close. This means attending a meeting where you sign a bunch of documents. Once this process is finished, you get your house keys and officially become a homeowner.

It’s crucial to have a strong team in order to take some of the workload off of you and provide guidance along the way. A great VA loan lender and real estate agent are key members of your home buying team.

Final Thoughts

Even though buying a home can seem daunting, it’s important to remember that there is a lot of support available to help you through the process. By following the simple steps listed in this article, and by working with a team of experienced professionals, you can make homeownership a reality for yourself. So what are you waiting for? Get started on your homebuying journey today!

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