VA Loan Rates Are Going Up: Should You Still Buy a Home?

If you're buying with your VA loan, watching rates climb every week probably has you thinking about waiting. Freddie Mac's weekly survey had the 30-year rate at 7.40% on October 8. The way I see it, the call comes down to whether the payment works for your household at today's rate, since that's the only rate anyone can plan on.

That was the seventh weekly rise in a row, Fox Business reported, and the highest reading in Freddie Mac's survey since November 2023.

Freddie Mac's number tracks conventional loans, so it isn't your VA rate. Optimal Blue's VA index, built from rates VA borrowers locked in, was at 7.12% in the reading CNBC reported on October 13. Your own rate still depends on your credit and the lender you pick.

Why Are Mortgage Rates Going Up Right Now?

Mortgage rates tend to follow the 10-year Treasury yield, and that yield has been climbing. Fox Business pointed to inflation worries, a bond market selloff, and heavy government borrowing pushing yields higher, with mortgage rates following along.

For some perspective, 7.40% is still a little under the roughly 7.7% average since Freddie Mac started tracking in 1971, which I walked through in my post on waiting for rates to drop. Where rates go from here, nobody knows, me included.

What a Higher Rate Does to Your VA Loan Payment

Say you're buying a $700,000 home with zero down and rolling in the funding fee for a first VA loan. My guide to buying a home with your VA loan covers that fee and the rest of the process.

At the VA index's 7.12%, the principal and interest on that loan comes to about $4,815 a month.

In early April, the St. Louis Fed's data had that same VA index just under 6%. The same loan would have run about $540 a month less.

Taxes, insurance, and any HOA dues sit on top of that. What I care about is whether the full payment works for your household today, with room left for everything else once it's paid.

If the only way the payment works is a refinance down the road, it doesn't work yet.

Where Fewer Buyers Can Work in Your Favor

Higher rates are keeping some buyers home. The Mortgage Bankers Association's weekly survey had applications to buy a home 15% below the same week last year, for the week ending October 2.

Fewer buyers usually means fewer people going after the same home, and I covered what that changes in your contract in this post on fewer buyers competing. On a VA loan, it can also make room to ask the seller for help with your rate. A seller credit can go toward lowering your rate, which lowers the payment every month, and when the market allows it, I ask for that credit in the offer. Nothing's guaranteed in a negotiation, but it's worth asking.

If you want to see what a seller credit could do to the payment in your price range, I'll run those numbers with you.

If you're still reading up, there are more posts for military families buying with a VA loan on the blog.

Are you holding off until rates come down, or still looking with today's rate in mind?

Questions I Get When Rates Go Up