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Topic 6. Interest Rates
May 14, 2024
This section has been updated to make minor grammatical edits.
Section b has been updated to ensure borrowers receive updated disclosures, as applicable, when the agreed upon interest rate changes.
a. Requirement
VA does not prescribe interest rates for VA-guaranteed loans. The interest rate is negotiated between the Veteran-borrower and the lender to allow the Veteran to obtain the best available rate.
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b. Changes to the Agreed Upon Interest Rate
The lender and borrower are expected to honor any lock-in or other agreements they have entered into which impact the interest rate on the loan. VA does not object to changes in the agreed upon rate, if no lender/borrower agreements are violated, and the borrower receives any necessary updated disclosures (such as the Loan Estimate and VA Refinancing Disclosures) reflecting the change in interest rate. The following procedure applies in such cases.
Any increase in the interest rate of more than one percent requires:
re-underwriting to ascertain the Veteran’s continued ability to qualify for the loan,
documentation of the change, and
a new or corrected Uniform Residential Loan Application, (URLA) with any corrections initialed and dated by the borrower.
Reference: For prior approval loans, see chapter 5.