In the fall of 2020, Erika Napoletano and her husband, Philip Kuras, an Army veteran, were house hunting in Tucson. They chose a VA lender based on internet research for the lowest loan rates, but their lender was being unresponsive and not disclosing all loan terms, as required by law. Napoletano knew this because she works in the financial industry, so she and Kuras went searching online for a new lender.
That’s how she found Own Up. Her Own Up home advisor, Charles, took their information and instantly sent a link with rates from about six different lenders. “I straight up told him we are preapproved, but I don’t want another hard pull on my credit. Can you just plug those numbers in?” Charles did, and then connected her with the lender they chose. “I’ve never seen something so transparent in my life, “Napoletano said. “It was just a whole different lender experience.”
Napolateno said everything about the experience was positive. The VA lender she connected with gave them an interest rate of 2.15%, which was 20 basis points, or 0.20% lower, then their previous lender. The couple chose a 20-year mortgage, which they plan on paying off in 11 years as she is in her 40s and he in his 50s. The couple chose to pay the required funding fee at closing, so it was not wrapped into the mortgage. Even better, while they were told at the outset that VA loans take 30 to 45 days to close, theirs closed in 29 days
“The Own Up dashboard was refreshing. That is a hugely important financial tool,” she said. “The more we pay for the mortgage, the less money we have to save. Own up played a critical role in the biggest purchase we will make in our lives,” she said.
Napoletano’s story is not unusual in that VA lenders, based on our research dating back to 2018, offer a wide range of loan rates. This is why it’s critical to shop around to different lenders. Data from 2021 shows that among the top 20 VA lenders, six lenders offered average rates that were higher than the average rates offered to all borrowers. This is despite the fact that the VA Home Loans program through the government was created, per the VA website, so the “VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.”
Our data shows that the rates are constantly changing, which strengthens the need to shop around. Still, there are some noticeable trends. Since 2018, two lenders, Penny Mac Servicing and United Shore Financial Services have consistently provided average rate spreads that place them in the Top 5 amongst the 20 largest VA lenders by loan origination amount. Also since 2018, Fairway Independent has consistently ranked in the bottom five, providing average rate spreads placing them among the worst of the top 20 VA lenders.
In 2021, the range between the lowest loan rates and the highest loan rates among the Top 20 VA lenders was 0.41%, down from 0.52% in 2020. This change is for comparable scenarios and holds constant for credit scores, loan amount and other factors affecting rates. The tightening of the range is a positive trend and could change, but its existence is reason alone to comparison shop. A half percentage point over 30 years equates to roughly 10% of the purchase price of the home in extra interest payments. For a home sold for $300,000, that’s $30,000 in extra interest payments over the life of the loan if the loan is never refinanced.
We are in a rate rising environment. Today's mortgage rates sit above 7%. It is ever more important for veterans to shop for VA loans.