Why are VA Loans Better than Conventional Loans?
Many veterans or other VA-eligible borrowers decide not to use their VA loan benefits because they’ve heard that the benefits of the VA loan program aren’t worth the hassle. That is not true. The VA loan program is far superior to conventional loans, and it is definitely worth it to use a VA loan instead of a conventional if you are eligible. VA loans are better than conventional loans in a number of ways, but we’ll cover the three main ways in this article. The three ways a VA loan is superior are that a VA loan is easier to qualify for, allows you to get better terms, and is more friendly to people in tight financial situations.
VA Loans are Easier to Qualify For
The heart of the VA loan program is the VA guaranty – the VA guarantees a percentage of the loan to the lender in case the borrower defaults on the loan. This lowers the amount of risk that a lender is taking on with a VA loan, and thus it makes VA loans generally easier to qualify for. This is especially true when you are working with a lender that specializes in VA loans. The VA loan program and conventional loans are very different, so you’ll maximize your benefits if you work with a lender that specializes in VA loans, rather than a lender that doesn’t know the VA program very well. Lenders that specialize in VA loans often have very relaxed credit requirements, which makes homeownership accessible to even those that don’t have great credit. If you do have great credit, you can expect to be offered a stellar interest rate – especially compared to a conventional loan.
The VA Loan Program Allows You To Get Better Terms
For the same reason that VA loans are easier to qualify for, you can also get much better terms on VA loans than on a conventional loan. When lenders take on a VA-eligible borrower, they aren’t taking on as much risk as they are with a conventional borrower since the VA is willing to guarantee a percentage of the loan amount. So a borrower with great credit that’s able to make a down payment can get much better terms on a VA loan than a conventional, and a borrower who doesn’t have the credit to qualify for a conventional loan at all can still get a VA loan. Anything you can qualify for on a conventional loan, you can qualify for a better version of through the VA loan program.
The VA Loan Program is More Friendly to Borrowers with Tight Finances
The single biggest barrier to a young couple buying their first home is saving up for a down payment. To make a 20% down payment on a $300k home, a young couple needs to save up more than $60,000 (especially since closing costs on that loan will probably be around $10k). The VA loan program addresses this barrier by offering a no-down-payment option. You can get a mortgage with a 0% down payment through the VA loan program. With a new purchase loan or a cash-out refinance, you’ll still have some closing costs to pay, but one of the biggest parts of closing costs, the VA funding fee, can be financed into the loan as well. Even when the borrower makes no down payment, the VA loan program does not require any mortgage insurance, which helps keep your monthly payment lower.
Summary & Conclusion
In short, the VA loan program trumps the conventional in every way that matters. Because of the VA guarantee, VA loans are easier to qualify for, come with better terms than you could get elsewhere, and have much better options for borrowers in tough financial situations. You really should pursue a VA loan if you are VA-eligible and are looking to purchase a home. The best thing you can do is look for a lender that specializes in VA loans, since they know the program well enough to know all of the great advantages available for you to take advantage of. There are more advantages to the VA loan program than what we have discussed in this article, and you can learn more about them by reading more of our articles or by giving us a call here at Low Va Rates.