Only active duty military and veterans who are eligible from the armed forces are eligible to VA mortgage rates. A loan of this sort is applicable to persons from the military regardless of which branch they are from. However, they are applicable only to active duty and honorably discharged veterans. A service member that has been dishonorable discharged from his/her services does not have access to these type of loans. One of the main advantages of a loan of this sort is the interest rate.
The interest rate for a VA mortgage is determined by the market value of the federal government bond rate. This leads to accounting for market conditions as well as the number of loans that have been purchased by the secondary mortgage market. The primary determinant of the rate is the number of investors who are buying loans in the primary and secondary markets at any point of time. As the potential yield for the investors increases, the interest rate for the consumers and borrowers falls. This affects the interest rates of not just VA loans, but all types of conventional loans as well. The current interest rate in the market is used as a base in the determination of the rate of VA mortgages. There are also other states, like Texas where the state provides a program designed specifically for Texas veterans which reduces the market rate by a quarter of a point compared to the current market rate.
The rate of interest goes through regular fluctuations. In the span of one week, they can fluctuate up to one point. The unpredictability of the rates makes it impossible to predict when the rates will go up or down. In the case of purchasing a home under a VA mortgage, when the interest rates are high the veteran cannot refinance the home when the interest rates fall. Regardless of whether the home was mortgaged using an adjustable rate or a fixed rate loan, the borrower is always provided with the option of lowering the rate by refinancing.