Conventional Loans Vs VA Loan – When it comes to conventional loans vs VA loan, it is often a confusing choice. VA loan are one of the most valuable for veterans. This provides an opportunity for qualified borrowers to consider mortgage options that are usually free of down payments, and some borrowers may be exempt from certain mortgage fees. The VA loan offers the option to qualify for a new loan using the original application information and later apply for a Streamline Refinance loan.
These are just a few of the reasons why it is wise to apply for a VA mortgage instead of conventional loans or other non-VA options. Some of the most attractive benefits of VA loan performance are simply not available on Conventional mortgages.
However, there are certainly times when a VA loan is not the best solution and a conventional loan is a better option. Here’s the difference between a VA loan and a traditional loan, and when one option is cheaper than the other.
It may seem easy to choose between conventional loans vs VA loan. There are no down payments, no mortgage insurance, and no better interest rates. The Veterans Affairs mortgage will definitely win.
However, the choice can be more complicated if you consider things like the Department of Veterans Affairs loan fees and raise enough money with a Conventional mortgage to abandon your mortgage insurance. And some of the benefits of VA loans include the minimum credit score and maximum debt-to-revenue ratio are not overvalued.
If you need more information about conventional loan mortgages, find out more at Just Funded Mortgage.
Conventional Loan Vs VA Loan
Here are some factors to consider when deciding whether to choose a conventional loan vs VA loan:
Property Type
First of all, when comparing conventional loans vs VA loan, it comes to the type of property you are buying can be a significant factor in conventional loans vs VA loan decisions.
As we already know, VA loans are only for primary residences that are different from conventional loans that not only can be used to buy primary homes but can also be used to buy villas, second homes, investment real estate, and rental properties.
Down payment
The big advantage of VA loans that can be compared to conventional loans vs VA loan is that VA loan usually does not require a down payment. If the purchase price of the property is higher than the current market price, the lender can request prepayment. This can happen in a highly competitive housing market with multiple bidding conditions.
Lenders offering Conventional loans have traditionally preferred higher down payments, but these days it’s easy to find traditional mortgages with a down payment of 3% or less.
Mortgage Insurance
As mentioned earlier, less than 20% of conventional loans require private mortgage insurance (PMI). PMIs range from $ 150 to $ 200 per month, depending on home prices, creditworthiness, and other factors. The PMI protects lenders by default when they take out a loan and typically protects lenders when they reach 80% of the mortgage loan amount. The VA loan does not require a PMI, it helps borrowers save money over the entire term of the loan.
Minimum Credit Score
One of the things that can be compared between a conventional loan vs VA loan is the minimum credit score. The Department of Veterans Affairs (VA) does not set a minimum credit score for VA loans, but most lenders do. As with conventional loans, some lenders want a mortgage credit score of 620 or higher.
Mortgaged Rates
Veterans Affairs loan rates are often the lowest in the market. According to mortgage software company Ellie Mae, the average interest rate on VA loans was the lowest at 4.27% until the third quarter of 2019, at 4.5%. The
VA loan is backed by the Department of Veterans Affairs, giving lenders the confidence to offer cheaper interest rates to borrowers who may not have full creditworthiness.
Debt to Income Ratio
There is no maximum debt-to-revenue ratio, but it also states that “if the total debt-to-revenue ratio exceeds 41%, the lender must provide a compensation factor. These “compensation factors” include residual income. This is the takeaway income left at the end of the month after the new mortgage and all living expenses have been paid.
Yes, VA loans are easy to qualify when it comes to debt and creditworthiness, but VA promotional materials may not be as easy as you would believe.
Which is better, a conventional Loan or VA Loan?
After we compared conventional loan vs VA loan, which is the better one? When weighing the strengths and weaknesses of conventional loans vs VA loan, take a look into what you can afford for your finances, needs, preferences, and qualifications. If you qualify, Conventional mortgages generally have lower hurdles than VA mortgages and can take longer to process.
Conventional loans are usually suitable for borrowers with a high credit score, while VA loans are ideal for borrowers with a low credit score. Conventional loans require mortgage insurance payments, but only if the deposit is less than 20%. In addition, costs can be removed when a certain level of capital is reached. VA loans do not require mortgage insurance, but you do have to pay a loan fee depending on the size of the loan.
Advantages of VA Loan Vs Conventional Loans
The main advantages of a VA loan are a $0 down payment, no PMI, flexible loan requirements, and very competitive rates. VA loans may be suitable for qualified veterans and service members without the ability to pay sterling credits or a 20% down payment. Conversely, a borrower with a high credit rating and enough cash to pay a large down payment may find a traditional loan more appropriate.
Now that you have an understanding of conventional loans vs VA loan, look for the best type of mortgages that are suitable for you. If you’re considering a conventional loan mortgage and need help navigating your option, get some help from Just Funded Mortgage.
Just Funded Mortgage is one of the best lenders in the United States. We are available on Monday – Friday: 9:00 AM – 7:00 PM to answer any questions you have about conventional loans vs VA loan or give us a call at 833-888-3863.
