VA Loans vs Conventional Loans

VA Loans vs Conventional Loans

There are multiple advantages to using a VA loan to purchase a house, and they can offer you a multitude of features that conventional loans do not. VA loans are available to active members of the military, veterans, and surviving spouses of service members who died in active duty or as a result of service-related disabilities.

For a comprehensive look at the advantages and disadvantages of VA loans, see our article: The Pros and Cons of VA Loans.

Benefits of VA Loans over Conventional Loans

If you qualify for one, you should consider using a VA loan to buy your home. Here are the top 3 benefits VA loans can give you that conventional loans don’t offer.

No Down Payment

The most positive aspect of a VA loan is that there is no money needed as a down payment. This means you can finance 100% of the purchase price without having a chunk of money saved to qualify for a VA loan.

Conventional home loans generally require an upfront payment of between 3% to 20% of the purchasing price. Depending on the cost of the house, even a down payment of 3% could take a year or more to save up. With a VA loan you have the opportunity to buy a home without having a lump sum of money stashed away or spending years saving for one.

Competitive Interest Rates

Another huge benefit of getting a VA loan to purchase a home is the competitive interest rates. In fact, VA loans have some of the lowest average 30-year fixed interest rates available on the market. This means you are spending less money over the life of your loan than you would with a conventional home loan.

The average interest rate on a conventional home loan is 3.75% for a 30-year fixed mortgage, at the time of writing. In comparison, VA loans have an interest rate that is typically .5% to 1% lower than a conventional loan’s interest rates.

And while conventional loans have requirements, such as minimum credit score and down payment percentage to qualify for the lowest rates, a VA loan may offer you the most competitive rates regardless of credit score and down payment.

No Mortgage Insurance

One of the most cost-effective features of a VA loan is that there is no mortgage insurance required. Mortgage insurance protects lenders if you default on your loan and will be a recurring monthly fee you need to pay until you’ve reached 20% equity in your home.

When buying real estate in Henderson, the benefit of VA loans is that the need for mortgage insurance is replaced by a one-time funding fee that can either be paid upfront at closing or rolled into your loan amount.

In order to avoid private mortgage insurance with a conventional loan, in most cases you’ll need to have at least 20% towards your down payment. Not having a monthly mortgage insurance payment with a VA loan can save you hundreds of dollars a month, and thousands of dollars over the life of your loan.

Will you Choose a VA Loan?

If utilizing a VA loan is an option for you when purchasing a home, you should take it into consideration. VA loans are not only meant to make purchasing a home accessible and affordable to active and veteran military but are intended to give them the added benefits they deserve.

It’s important to do your research and compare all of your options for mortgage to make the best decision for you. But you will likely find that a VA loan can save you money at all points of the home buying process.  

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*Disclaimer: This material is provided for information purposes only and is not to be construed as investment or tax advice. Readers are strongly advised to consult with their professional advisors regarding the information herein.

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