Are you thinking about buying a house soon?
Of course, you may want to purchase your first home or upgrade to a bigger home where your family can grow. However, the entire home-buying process can be exhausting, especially if you haven’t gone through it before.
Have you started looking into the different loans available to you? Are you weighing your options between VA or a conventional loans? If so, you have come to the right place.
In this post, we will check between a conventional vs VA loan to make your big decision easier. Let’s get started.
The Benefits and Downsides of a VA Loan
With the pros and cons of a VA loan, eligible borrowers can finance 100% of the purchase price. The obvious advantage to this is not having to come up with a down payment, which can be a challenge for first-time homebuyers or those with limited savings.
Another is that eligible borrowers won’t pay any private mortgage insurance (PMI), regardless of how much they finance. They also tend to have more relaxed credit and income requirements than conventional loans.
The downside of a VA loan is that there are limits to how much you can borrow. You may also require the payment of a VA Funding Fee. It is a one-time fee charged to all borrowers with a VA loan that helps cover the cost of the program.
You may also not be able to use it to purchase an investment property or a second home. For more reference, you can check here for topics like are VA loans assumable.
The Benefits and Downsides of a Conventional Loan
A conventional loan is a type of mortgage loan that is not insured or guaranteed by the government. This means that if you default on the loan, the lender is not protected from loss.
Conventional loans are typically fixed-rate loans, meaning the interest rate stays the same for the life of the loan. This can help borrowers budget and predict their monthly mortgage payments. However, if interest rates rise, so will the monthly payment.
Conventional loans typically require a higher down payment than government-backed loans, such as FHA loans. Borrowers with good credit and a large down payment may qualify for a conventional loan with a lower interest rate than they could get with a government-backed loan.
The Key Differences Between a Conventional vs VA Loan
There are several key differences to consider between a VA loan vs conventional loan. One is the interest rate. VA loans often have lower interest rates than conventional loans. This can save money over the term of the loan.
Another key difference is the down payment. VA loans generally do not require a down payment, while most conventional loans do. This can make buying a home more affordable for eligible veterans and their families.
There are also different eligibility requirements. VA loans are only available to eligible veterans, while conventional loans are available to any qualified borrower.
Consider Your Options Before Choosing
If you’re a veteran considering a VA loan, consider your options and compare them against a conventional loan to get the best deal.
VA loans offer several key benefits, such as no down payment, no monthly mortgage insurance, and lower interest rates, but they also have some disadvantages, such as a lack of flexibility and a potential for higher closing costs.
Work with a loan officer to compare a conventional vs VA loan and find the best fit for your needs.
If you’re interested in learning more about the home-buying process, stay tuned for the more helpful content.