How do I Find the Best VA Mortgage

By Fraser Sherman

Finding the best VA mortgage isn't that different from finding the best conventional mortgage. The U.S. Department of Veterans Affairs backs loans to veterans and current military members, insuring the lender against losses if the borrower defaults. This makes it possible to buy a house with no money down, something lenders would normally balk at. The VA doesn't dictate the loan terms, however. Lenders decide on the interest rate and the closing costs. To find which one offers the best deal, you'll have to shop and compare.

Get a credit report before you start shopping. Even with a VA loan, avoiding a down payment requires good credit, the VA states, so check your report for any errors--debts that have been paid off or never existed, for instance--and correct them. You can order free reports from the three major credit bureaus through the Annual Credit Report website, though you'll have to pay if you want your actual credit score as well.

Talk with several lenders and ask if they handle VA loans. Then ask about their interest rates and costs. In addition to talking with lenders directly, the Federal Reserve recommends that you meet with a mortgage broker, a professional who knows the local market and can gather offers from several lenders for you. You can also check out websites that offer to provide multiple quotes, but be careful. It's easy for scam artists and identity thieves to set up phony companies online to lure you in, so stick with established lenders.

Ask any lender who looks promising to give you a complete list of their closing costs, including appraisal fees, loan-underwriting fees and title insurance. The VA recommends you shop around because the costs can vary greatly between lending institutions. Make sure you've asked the same questions of each lender. If one thinks you want a fixed-rate mortgage and another thinks you want an adjustable-rate mortgage, their interest-rate quotes won't be comparable.

Negotiate the costs down, the Federal Reserve recommends. Ask the lender if they'll waive or lower some of the fees, or if the interest rate is the lowest you can get; on any given day, a lender may have a range of rates they can offer. If you feel you've got the best deal possible, make an agreement to lock in the rate, so that it won't go up even if the market changes.

If you're working with a real estate agent, he may be able to steer you toward lenders who handle VA loans, saving you some time.

Brokers aren't obligated to go out and find you the best possible deal unless you contract with them to work on your behalf, according to the Federal Reserve.

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