VA Home Loan vs. Conventional Home Loans: What’s The Difference And What’s Right For You

Single family house on pile of money. Concept of real estate.

Having a good credit is important as you may need to borrow money from banks or other lending institutions in the future. One of these loans is a home loan – eventually, you will want to purchase a home for yourself when you grow older as it is an investment, and more importantly, it is a place you can call your own. There are several types of home loans, but the ones that we will be focusing today are the VA home loan and the conventional home loans. For those people who are serving in the military or are veterans, you can choose between a VA home loan and a conventional home loan. However, how do you know which loan is best for you? This will be further discussed below.

VA Home Loan

With a VA home loan, you can only purchase a primary home. The best part about it, though, is that you there is no down payment requirement and you will not need to pay for mortgage insurance. However, you will need to pay a funding fee, which ranges from 1.25 percent to 3.3 percent of your total loan or as told to you by your lender.

As with any institution providing you with a loan, having an excellent credit rating is essential. With a VA home loan, however, it is not necessary to let your lender know of your credit score as you are guaranteed by the Department of Veterans Affairs. By showing them that you have a good credit rating, though, your lender will be more comfortable in providing you the money.

As for the interest rates, it is generally lower as compared to a conventional home loan’s interest rates. In addition to that, you may qualify for 100 percent financing.

To qualify for a VA home loan, you must be serving in the army, a veteran, or a military spouse. Since you are being backed by the government, processing this loan may take longer. However, it is the current best choice as it is definitely more lenient.

Conventional Home Loan

On the other hand, with a conventional home loan, there are no government guarantees. Also, they follow the standards of government sponsored enterprises such as Fannie Mae and Freddie Mac – these enterprises work to ensure that credit flows to certain sectors of the economy.

To be qualified for a conventional loan, though, you must first and foremost have an excellent credit rating – a common standard to qualify for this home loan would be 620 or higher. This changes every year, though, so the better your credit rating, the higher your chances of being approved for a home loan.

If you are confident with your credit rating, then rest assured, the process will be fairly easy. With a conventional home loan, you can buy a primary home, a vacation home, or an investment property. In terms of down payment, you will need to put down a down payment of 3 to 5 percent (on a case to case basis).

In addition to that, there are no funding fees. However, you will have to pay for mortgage insurance if you cannot pay a downpayment of 20 percent or more. Lastly, as compared to VA home loans, the interest rates of a conventional home loan tend to be higher as you are not guaranteed by the government.

With all that has been mentioned, how do you know which loan best fits you? Well, if you are serving in the military or have done your part and this is your first time buying a home, perhaps the current best choice would be a VA home loan as you are entitled to it.

Though the process may take slightly longer, it is worth the wait as the pros outweigh the cons. In addition to that, remember that you are being guaranteed by the government to your private lender – this will give them more reason to trust you. All you need to do is to maintain that trust.
If you are considering a VA IRRRL refinancing, find out about the current guidelines, interest rates, and requirements at so you can make an informed decision.