What are VA Loans vs Conventional Loans? The Advantages a VA Loan Offers If you are ready to buy a new home for yourself and your family, you may need a loan. There are many ways that you can go about getting the loan that you need to secure your purchase of a home. If you are a veteran of the United States armed forces, you have the option of a VA home loan. You should be aware of the advantages that come with applying for this type of loan over a conventional home loan. What are VA Loans vs Conventional Loans? A VA loan is secured with the backing of the Federal government. In this case, the agency backing your loan would be the Veterans Administration (VA). Other home loans, such as those offered by a bank or other commercial institution, are known as conventional loans. These are loans that are not secured by the VA or any other agency of the Federal government. What are the Advantages a VA Loan Offers? There are many advantages that a VA home loan offers over a conventional loan. To begin with, in most cases, a VA loan does not require a down payment. This is not the case if you apply for a conventional home loan. To secure this kind of loan, you will normally be required to make a down payment of 5 percent. If you apply for an FHA loan, the figure is usually 3.5 percent. There is No Monthly Insurance Premium to Pay In most cases, a person receiving a loan from the VA will not be required to make a monthly insurance premium payment. This is because the loan has already been insured by the VA itself. By contrast, persons who receive an FHA loan will be required to pay an upfront charge for mortgage insurance, as well as an additional annual charge. If you qualify for a conventional loan, you can expect to pay any number of mortgage insurance premiums and fees unless you are making an initial down payment of over 20 percent. The premiums you pay may rise even higher, or fluctuate uncomfortably, if you are taking out an adjustable rate mortgage. You Can Expect to Pay Lower Average Interest Rates Home buyers who qualify for a VA sponsored loan can expect to pay much lower interest rates on average than those who receive other types of loans. At the time of writing, the average interest rate associated with a VA loan continues to be much lower than FHA or conventional mortgage rates. You Don't Have to Worry About Prepayment Penalties
One of the best features associated with a VA home loan is that you can decide when to pay it off. You can pay off the loan as early as you like. There is no need to worry about prepayment penalties. This is not normally the case with conventional loans Other Advantages Are Available The advantages listed above are only a few of the many features that come with qualifying for a VA home loan. If you are interested in acquiring such a loan to buy your home, contact your local VA loan specialist for personalized help.