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VA vs. Conventional Home Loans: Choosing the Right Option

By
Mortgage and Lending with Veterans United Home Loans of Puget Sound NMLS#1907 NMLS 120968

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.

 

Show All Comments Sort:
Jeff Masich-Scottsdale AZ Associate Broker,MBA,GRI
HomeSmart Real Estate - Scottsdale, AZ
Arizona Homes and Land Group/ Buy or Sell

Good points Trish on the loans and drew my attention due to one of my favorite Christmas gifts as a kid....Rock'em Sock'em Robots!

Dec 27, 2024 08:44 AM
Trish Cole

Thank you Jeff.  I thought that was good graphic to grab attention.  :)

Dec 27, 2024 10:51 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Trish and great blog on wish loan works the best to buyers.  hope you are ready for a great 2025

 

Dec 27, 2024 09:14 AM
Trish Cole

You as well Hamm!  Cheers to 2025 being a great year!

Dec 27, 2024 10:52 AM
John Pusa
Glendale, CA

Hello Trish Cole very valuable educational report for VA vs. conventional loans to choose the right option.

Dec 27, 2024 10:59 AM
Trish Cole

Thank you John.  Hopefully it helps educate a home buyer to ask about options.

Dec 30, 2024 09:31 AM
Lew Corcoran
Better Living Real Estate, LLC - East Bridgewater, MA
Expert guidance. Exceptional results.

Thank you, Trish Cole, for providing such a thorough comparison of VA and conventional home loans! Your insights make it easier for potential borrowers to make informed decisions, and I appreciate you sharing this valuable information.

Dec 27, 2024 12:07 PM
Trish Cole

Thank you Lew.  It is important for borrowers to know there are choices and one might fit there needs better, with less cost to them.

Dec 30, 2024 09:30 AM
Richard Weeks
Dallas, TX
REALTOR®, Broker
Great information, thanks for sharing.  I hope you have a great day.
Dec 28, 2024 03:41 AM
Trish Cole

Hi Richard,  Thank you.  It is important to make sure the client has a loan that fits them.

Dec 30, 2024 09:29 AM
Brian England
Ambrose Realty Management LLC - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

This is a good discussion and a good lender will always make sure their clients are in the best loan possible, whether it be VA, conventional, FHA, etc.

Dec 28, 2024 05:56 AM
Trish Cole

Thank you Brian.  That would be the goal.  To make sure the client has the best loan option to fit their needs.  

Dec 30, 2024 09:28 AM