There is nothing more fulfilling than finally being able to find and buy your dream house. However, the problem is that not everyone has the financial means to invest in a brand new house. This is where seeking funding from a bank or financial institution comes into the picture. In this case, you can get a mortgage from a lender, whether you opt for a conventional or a non-conventional loan.
Here at Shannon Christenot, we offer a wide range of home loans in Los Angeles, whether you’re looking to buy a new house or refinance a loan. Apart from conventional loans, we also offer FHA, VA, and USDA loans. Whether you’re in the military looking for a VA loan or a first-time homebuyer seeking a conventional loan, we’ve got you covered!
In this article, we will specifically share with you the differences between VA and conventional loans.
Non-conventional loans versus conventional loans
Let’s first take a look at the major difference between the two terms, as follows:
- Non-conventional loans: These types of mortgages are typically offered by private lenders like banks and financial institutions, which means that the government doesn’t back them. However, they are ideal for borrowers with a stable income, good employment or business, good credit standing, and minimal to zero debts.
- Conventional loans: These types of mortgages are insured or backed up by the government, and they are designed to help the average Americans to become homeowners. They are basically ideal for those with lower income or less-than-perfect credit due to the flexible features of what they offer. There are three types of home loans under this: Federal Housing Administration (FHA), the United States Department of Agriculture (USDA), and the Veterans Administration (VA) loans.
Choosing between VA and conventional loans
If you’re looking to decide between a VA loan and a conventional loan, below are five key factors you must consider to help you make a well-informed decision:
- Property type: Keep in mind that most houses under VA loans are primarily for residence only. However, conventional loans can be used to purchase a second home, a rental property, or an investment property.
- Down payment: What’s great about VA loans is that they don’t have any down payment requirements. On the other hand, conventional loans typically require a ten-percent down payment, but they can go as low as three percent.
- Mortgage insurance: Know that VA loans don’t require mortgage insurance, while conventional loans have private mortgage insurance. Furthermore, a private mortgage insurance (PMI) is also a way to protect the lender if you default on the loan.
- Credit score: The minimum credit score between 580 and 620 is typically needed for veterans and military personnel seeking a VA loan. However, conventional mortgages require a 753 FICO score.
- Mortgage rate: Typically, the interest rate is a determining factor in choosing a mortgage. Keep in mind that VA loans have an average rate of 2.72 percent, compared with 2.99 percent on a conventional mortgage.
At this point, you now know the major differences between VA and conventional loans. When choosing between the two, be sure to consider the five key factors outlined above—property type, down payment, mortgage insurance, credit score, and mortgage rate. With all these in place, you’ll be able to make the right decision in getting the right mortgage, whether it is a VA or conventional loan! Are you looking for a conventional mortgage or a VA loan? You’ve come to the right place! As a mortgage broker in Los Angeles, we provide various types of loans that will fulfill your needs. Get in touch with us today at (818) 601-2231 to see how we can help!