The search for the perfect home can take up a considerable amount of your time, but your work doesn't stop there. You'll also need to settle on the ideal home loan to get the monthly payment and repayment term you want. One common comparison is between conventional mortgages 🐽for everyday consumers and VA loans for eligible military mౠembers, veterans, and surviving spouses. Unlike the former, VA loans tend to have lower interest rates and closing costs, and they may not require a down payment.

What Is a VA Loan?

VA loans are for veterans, active duty servicemembers, and certain surviving spouses who are eligible to use a VA loan benefit. These 澳洲幸运5开奖号码历史查询:home loans can be used t♎o purchase a new or existing home, or even to build, repair, or adapt aꦍ home to use as a personal residence.

VA loans result from a lifetime VA loan benefit that can be used over and over again throughout a veteran's lifetime. These loans come with the following benefits:

• Competitively low 澳洲幸运5开奖号码历史查询:interest rates
• No 澳洲幸运5开奖号码历史查询:down payment required (with some lenders)
• No need for 澳洲幸运5开奖号码历史查询:private mortgage insurance (PMI)
• Limited 澳洲幸运5开奖号码历史查询:closing costs

While VA loans don't require PMI, they do require a VA funding fee in its place. This fee is paid one time, when the loan is 澳洲幸运5开奖号码历史查询:originated, and it can range from 1.25% to 3.3% of the purchase price based on the down payment and the number of times a VA loan benefit has been used.

What Is a Conventional Loan?

A 澳洲幸运5开奖号码历史查询:conventional mortgage is a type of home loan that anyone can get approved for provided they meet eligibility requirements. This type of loan can be 澳洲幸运5开奖号码历史查询:conforming or 澳洲幸运5开奖号码历史查询:non-conforming depending on the loan amount, and various loan repaymen𒅌t terms are available. 

Conventional mor🐼tgages come with the following benefits when compared to VA loans:

• No military affiliation required
• Competitive interest rates
• Can be used for primary homes, second homes, and investment properties

VA Loan vs. Conventional Loan: Key Differences

If you are 澳洲幸运5开奖号码历史查询:eligible for VA loans but are also considering conve💃ntional home loans, you should know about the key differences as well as the pros and cons of each loan type.

Eligibility Requirements

VA loans require military affiliation, but they’re made to have looser eligibility requirements beyond that. For example, VA loans don't have a set minimum 澳洲幸运5开奖号码历史查询:credit score, although some lenders may want to see a credit score of at least 620 unless there is a large down payment. Lenders also like to see a 澳洲幸运5开奖号码历史查询:debt-to-income (DTI) ratio below 41%.

Conventional mortgages typically require a minimum credit score of 620 and a DTI r🌞atio of no higher than 50%.

Down Payment

VA loans don't require a down payment at all, and this is one of their biggest benefits. Meanwhile, conventional loans typically require a down payment of at least 3%.

Private Mortgage Insurance (PMI)

Conventional mortgages require PMI if you put down less than 20% of the purchase price. However, this added cost is eventually removed from the monthly housing payment once the amount you owe falls to 80% of the original value of the home.

VA loans don't have a requirement for mortgage insurance, but they do require an upfront VA funding fee of 1.25% to 3.3% of the purchase price of a home.

Interest Rates

Mortgage rates 🦂for conventional lo🍌ans and VA loans are typically competitive, especially for consumers with strong credit profiles. However, average VA loan rates still tend to be slightly lower than rates on conventional home loans.

Loan Limits

VA loans don't have any specific loan limits. This mౠeans you can use a VA loan benefit to purchase any el☂igible home at any price point.

Conventional home loans don't have any limits either, although loans that fall within limits set by 澳洲幸运5开奖号码历史查询:Fannie Mae and Freddie Mac are consid💯ered conforming, while loans above that amount are non-con𒈔forming.

Closing Costs

Closing costs for all types of mortgages vary based on the loan type, lender, loan amount, and other factors. However, VA loans cap 澳洲幸运5开奖号码历史查询:origination fees at 1% of the loan amount, whereas these fees for conventional loans can be 0.5% to 1%. In full, closing costs for conventional loans can be 2% to 6% of the loan amount, while 澳洲幸运5开奖号码历史查询:closing costs for a VA loan typically fall between 3% and 5% of the loan amount.

Conventional Loans vs. VA Loans

The Bottom Line

Because VA loans come with no down payment requirement, low closing costs, competitively low interest rates, and no requirement for PMI, they’re u🎉sually the better deal for those who have a VA loan benefit. However, it still makes sense to shop around among the best mortgage lenders while comparing available loan products.

Ideally, you'll pick a home loan with a monthly payment and repayment term that best suits your financial situation. If you have access to a VA loan benefit, your journey toward homeownership may be much easier.