VA vs. Conventional Home Loans: Choosing the Right Option
When it comes to home loans, VA and conventional mortgages are two popular options, each with unique benefits. Let’s explore the differences to help you determine which might be the best fit for your needs.
What is a VA Loan?
VA loans are government-backed mortgages designed for Veterans, active-duty service members, and eligible surviving spouses. These loans offer significant advantages, such as:
- No down payment
- No private mortgage insurance (PMI)
- Competitive interest rates
However, VA loans are only available for primary residences and include a VA funding fee, which can range from 1.25% to 3.3% of the loan amount (with exemptions available in some cases).
What is a Conventional Loan?
Conventional loans are not government-backed and adhere to guidelines set by Fannie Mae and Freddie Mac. They’re widely available and can be used for various property types, including second homes and investment properties. Features include:
- Down payments starting as low as 3% (though 20% avoids PMI)
- No specific eligibility requirements
- No program-specific fees like the VA funding fee
Key Differences at a Glance
Comparison Factor |
VA Loan |
Conventional Loan |
Eligibility |
Veterans, active-duty, spouses |
Open to all eligible borrowers |
Down Payment |
$0 |
3% to 20% |
Private Mortgage Insurance |
None |
Required if <20% down |
Interest Rates |
Typically lower |
Typically higher |
Property Type |
Primary residences only |
All property types |
Program Fees |
VA Funding Fee |
None |
When to Choose a VA Loan
- Limited funds for a down payment: VA loans require no down payment, allowing for easier access to homeownership.
- Avoiding PMI: Save thousands over the life of the loan.
- Lower credit score: VA loans have flexible credit requirements compared to conventional loans.
When to Choose a Conventional Loan
- Buying an investment or vacation property: VA loans are restricted to primary residences.
- Avoiding program fees: Conventional loans don’t include fees like the VA funding fee.
- Waiving appraisal contingencies: In competitive markets, conventional loans may have more flexible terms.
The Bottom Line
VA loans are often the most cost-effective option for eligible military borrowers, but conventional loans can provide more flexibility depending on your financial situation and property goals.
Evaluate your personal circumstances, including your eligibility, property type, and financial plans, to make the best decision and reach out to a Mortgage professional to help you easily determine the best options.
Want to explore your loan options? Start today! Contact Trish Cole NMLS 120968 Veterans United Home Loans Trish.Cole@vu.com.
PugetSoundVALoans.com. (253)617-6200. 10514 156th St E, Suite 104, Puyallup, WA 98374. Veterans United Home Loans is a VA approved Lender; Not endorsed or sponsored by the Dept. of Veterans Affairs or any govt. agency. NMLS #1907 (nmlsconsumeraccess.org) Equal Opportunity Lender.
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