How VA Home Loans Compare to Conventional Mortgages

If you’re a veteran, an active-duty service member, reservist or military spouse, taking advantage of your VA home loan benefits may be a smart decision. Mortgages through the U.S. Department of Veterans Affairs come with several advantages that can make buying a home easier on you and your budget.

However, no single financing solution is right for everyone – and in certain circumstances, a conventional mortgage can be more practical than a VA home loan. To figure out which best meets your needs, consider the following factors.

Property Type

You can only use a VA loan to finance the purchase of your primary residence, or the home you plan to live in for most of the year. With a conventional mortgage, you can also buy a primary home – or, if you like, you can use the loan for a second home or an investment property.

Down Payment

If you take out a VA home loan, you won’t need to save up for a down payment unless the property purchase price is higher than its market value. A conventional mortgage requires you to put money down – at least 3 percent, though some lenders ask for 5 percent or more.

Credit Score

As far as the VA is concerned, the loans they insure have no minimum credit score. But if we’re being honest, we have to mention that lenders typically look for scores of at least 620. As for conventional mortgages, the minimum to qualify is between 620 and 640, but a higher credit score is necessary for a lower interest rate.

Interest Rate

The interest rate for a conventional mortgage depends heavily upon your credit score, and if yours is less than stellar, you may not like the lender offers. With a VA loan, you’re more likely to see a favorable interest rate – and that means lower monthly mortgage payments and reduced overall costs.

Other Loan Costs

If you choose a VA loan, you can expect to pay a funding fee of between 1.25 and 3.3 percent of the home purchase price. However, the one-time charge can be rolled into your home loan total.

A conventional mortgage won’t come with a funding fee. But if you don’t make a down payment of at least 20 percent, you’ll have to pay for private mortgage insurance. The rate for PMI can be up to 2.25 percent of the original loan amount – and it must be paid every year until you have at least 20 percent in home equity.

Should you go with a VA home loan or a conventional mortgage? Only you can make that decision – but if you want expert advice from a leader in the northern Utah home lending industry, turn to the professional team at Integrity First Lending.

Our highly experienced mortgage brokers have the skills and qualifications to find your ideal financing solution. If you’re ready to buy a home in the greater Salt Lake City area, contact Integrity First Lending to discuss VA home loans and conventional mortgages today.