VA Loan vs. Conventional Loan
Getting approved is easier on a VA loan.
The VA loan program exists to make it easier for veterans to get the home loans they need at the terms that will serve them best. Therefore, it’s no surprise that one of the biggest advantages to VA Loans is how much easier they are to qualify for than conventional loans. The VA loan program offers many more lending options for veterans and are by far easier to apply for, and the VA is always working to improve the program and bring more options. In stark contrast, the lending options for those seeking conventional loans have gotten fewer and farther between due to the recession. But most importantly, the VA loan program has strict guidelines in place purely to protect the veteran from loan terms that are too risky or aggressive.
Lower interest rates than the national average for conventional loans
Often, the thing that affects a potential borrower’s decision the most is the monthly mortgage payment. This is another advantage to VA loans; on average, VA loans have interest rates 0.5% lower than what you’d find in the conventional loan market. That means that on a $280,000 VA loan, a veteran would save roughly $75 per month, saving the veteran about $27,000 over the duration of the loan ($75 *12 months*30 years) Depending on your credit and other factors, the VA interest rate could even be farther below its conventional counterpart.
On average, VA loan rates are as much as 0.5% lower than conventional loan rates. A veteran would save roughly $75 per month on a $280,000 VA loan vs. a comparable conventional loan.
Streamline Refinance or Interest Rate Reduction Loan (IRRL)
The difference between a normal refinance and a streamline refinance is that a normal refinance is a whole new loan with new underwriting and application process that pays off and replaces your old loan, while a streamline refinance takes most of the underwriting information from the previous loan and uses it alongside your payment history to determine your new interest rate. For the VA streamline refinance option, the VA requires that the new terms result in a lower monthly payment than the previous loan. To qualify for the IRRRL, a veteran must simply already have a VA loan and that loan must be in good standing. Compared to any other streamline refinancing in the conventional or FHA market, the VA IRRRL is a clear winner.
100% financing or no-money-down purchase loans for veterans.
For many, saving up for a down payment is a large obstacle to buying a home, and is one thing that keeps families in rental properties for longer than they would like to. The VA loan program offers true no-money-down options for veterans who cannot afford or simply don’t want to make a down payment. While there are cases where there would be some out-of-pocket costs, the great majority of loans can roll the closing costs of the loan and the VA funding fee into the overall cost of the loan, making the chance to buy your dream home viable. With record low prices for homes across the country and the rise of motivated sellers, there has never been a better time to buy a home.