Differences Between VA Loans Vs. Conventional Loans
If you plan to buy a home, you are undoubtedly considering the various types of loans to finance your purchase. You may also wonder about the differences between VA and conventional loans. There are similar aspects between these two types of loans; buyers can select lenders based on their status as a civilian or as an eligible, active-duty military member. Both have specific requirements and advantages which can apply to your circumstances.
French Brothers welcomes new home buyers to explore the University Meadows community in Las Cruces and discover how to become a new resident. You can purchase a property with either a VA loan or a conventional loan, so it is essential to understand the differences.
What Is a VA (Veterans Affairs) Loan?
If you are a veteran or an active military member, you are eligible for a flexible, low-cost VA loan. These are known as non-conforming loans, meaning they are designed to be held by the lending institution for the duration of the contract and will not be transferred to another financial institution. This is why these particular financial agreements are accessible to a more diverse base of borrowers. Individuals and partners with a little credit history or who may be starting to build their credit can qualify to buy a home.
What is a Conventional Loan?
This type of lending agreement is known as a conforming loan, which makes it eligible to be transferred to a large mortgage buyer such as Fannie Mae or Freddie Mac. The exception to this scenario is a jumbo loan which may or may not exceed specific limits set by large mortgage buyers, making it a non-conforming loan. These financial instruments may also have more stringent requirements for borrowers to meet before they can qualify. Regardless, these are the most common types of loans, yet since the government does not back them, they may not carry some of the benefits found in VA, USDA and FHA loans.
VA Loan Vs. Conventional Loan
As you begin looking for a lender so that you can buy your new home, consider your financial history and your status as either a civilian, active member of the military or retired service person. Also, you will need to determine whether your current credit will present you to lending institutions as a qualified borrower.
- VA loans are designed to accommodate military veterans and their surviving spouses.
- VA loans have a specific range of interest rates, benefits and qualification requirements.
- VA loans are backed by the US Department of Veterans Affairs (VA).
- Private lenders that handle VA loans are guaranteed specific terms from the VA. These loans usually have lenient terms for borrowers and do not require a down payment.
- The VA offers home purchase loans, cash-out refinance loans, rate and term refinance loans, jumbo loans, renovation loans and interest rate reduction refinance loans (IRRRL).
- VA loans are non-transferrable to other financial institutions.
- The funding fee on a VA loan which is assessed during the closing can be waived for disabled veterans.
- Conventional loans have more stringent terms for qualification than VA loans and usually require a down payment.
- Conventional loans are the most common types of loans and can be configured with a wide array of specific terms.
- Conventional loans are backed by private lenders such as banks and credit unions.
- Conventional loans are conforming and can be transferred to a large mortgage buying institution.
Take the Next Step
The University Meadows community by French Brothers is ideal for military veterans and active service members because it is conveniently located near Holloman Air Force Base, White Sands Missile Range and Ft. Bliss. Members of the armed forces can qualify for a VA loan and quickly finance a residential property with a government-backed loan that is easy to qualify for and requires no down payment. Contact us to learn more about new homes which are ideal for military personnel.