Conventional vs. VA Loan
See the unique advantages of a VA Loan
As a result of the many changes to the mortgage industry, the options for a conventional loan with $0 Down have disappeared and a VA LOAN is one of the only Zero Down home loans left.
Not only can you save with a VA Loan by not having to have money for a down payment, you also save money by not having to pay monthly mortgage insurance required by other programs with less than a 20% down a payment.
In the past VA loans involved more red tape and hoops to be jumped through than other loans. But the process has been streamlined and is no more difficult than other loan programs. This is why so many families are beginning to take advantage of their VA benefits and get a VA Home Loan instead of a conventional loan.
Down Payment - VA Offers $0 Down
In today's market, banks and mortgage lenders are generally asking for 10-20% down on non-government loans. Because a VA Loan is guaranteed by the federal government, banks and mortgage lenders do not require a down payment for veterans purchasing a home with a VA Loan.
Monthly Payment - Save Every Month with VA
Because the loan is guaranteed by the federal government, banks and mortgage lenders do not require PMI (private mortgage insurance), an added monthly expense required for conventional loans where the borrower finances more than 80% of the home's value, and on all FHA loans.
Qualification Standards - VA is More Lenient
The qualification standards for each loan type are very different. Once again, because the loan is backed by the government, banks assume less risk and have less stringent qualification standards for VA Loans making them easier to obtain.
Conventional loans require a higher credit score while VA lenders only require a minimum score of 640 to take advantage of your veteran’s benefits. VA Loans also allow for a much higher DTI (Debt to Income Ratio). Where conventional loans limit the DTI to 45% VA allows for to it to be as high as 55%.
Conventional loans recently went to risk based pricing. What this means is that the best interest rates are reserved for those with credit scores of 740 or greater. Anyone with scores below 740 will pay a higher rate, the lower your score, the higher your rate will be.
As you can see, unless you have great credit scores and are using a down payment greater than 20%, a VA loan has many great advantages over conventional loans.
Give me a call today to see how much you can save on the purchase of your new home by using your VA benefit.