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VA loans vs. conventional loans

Learn the differences between these mortgage choices

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When you're a veteran, you can often choose between a VA loan and conventional loan when you want to buy or refinance a home.

VA loans are backed by the government and offered by lenders like Freedom Mortgage. They are only available to veterans, active-duty military personnel, and surviving spouses who qualify. Conventional loans are offered by lenders without a government backing and are available to everyone who meets the requirements.

VA loans are often a better choice when you want to finance a house. That's because VA loans frequently have lower interest rates, lower down payments, and easier refinancing options compared to conventional loans.

There are houses you can buy with conventional loans you can't buy with VA loans, however. And both loan types come with requirements and costs you'll want to understand. Check out our comparison table and read our discussion below!

  VA Loans Conventional Loans
Finance primary home Yes Yes
Finance second home, rental property No Yes
Down payments No in many cases Yes
Interest rates Can be lower than conventional loans Can be higher than VA loans
Minimum credit score Often lower Often higher
Funding fee Yes No
Mortgage insurance No Yes if down payment is less than 20%
Closing costs Yes Yes
Easier refinancing with streamline program Yes No

VA loans are for primary homes only

You can only buy or refinance your primary residence (which is the home where you live most of the time) with a VA loan. You can finance primary homes, vacation homes, rental properties, and investment properties with conventional loans.

VA loans have no down payments

In many cases, it is possible to buy a home without a down payment using a VA loan. When you buy a house with a conventional loan, you will need to make a down payment.

VA loans can have better interest rates

VA loans have interest rates that are competitive with the rates for conventional loans. Many times you'll find rates on VA loans are lower than rates on conventional loans too.

VA loans have lower credit scores

Lenders often want a minimum credit score for a VA loan which is lower compared to a conventional loan. Freedom Mortgage is proud to be a top VA lender in the United States* and we help veterans get VA loans with lower credit scores.

VA loans have funding fees

VA loans have funding fees, which you need to pay at closing or finance into your loan amount. Funding fees help protect the VA home loan program when a mortgage defaults. The VA funding fee is based on your loan type, loan amount, and other factors. Some veterans and surviving spouses are exempt from paying the fee. Conventional loans do not have funding fees.

Conventional loans have mortgage insurance

You have to pay for private mortgage insurance if you make a down payment of less than 20% when you buy a house with a conventional loan. You don't have to pay for mortgage insurance with a VA loan.

VA loans and conventional loans have closing costs

Both VA and conventional loans come with closing costs. These costs vary from loan to loan and lender to lender. The Department of Veterans Affairs puts limits on the closing costs you can be charged for VA loans, however.

VA loans have easier refinancing

Homeowners with VA loans may qualify for streamline refinancing, which may allow you to lower your rate with less paperwork and quicker closings. Streamline refinances are also called Interest Rate Reduction Refinance Loans (IRRRLs). Conventional loans do not have streamline refinancing. You must complete a full application to refinance a conventional loan.

Talk to Freedom Mortgage about VA loans and conventional loans

Freedom Mortgage offers VA and conventional loans. Talk to our experienced Loan Advisors today by calling 877-220-5533 or Get Started online.

*Inside Mortgage Finance, Jan-Jun 2022

Last reviewed and updated May 2023 by Freedom Mortgage Corporation.

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FHA loans vs. VA loans

Learn more about the differences between FHA loans and VA loans

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Are you eligible for a VA loan?

Veterans, active duty personnel, and surviving spouses are eligible

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How to apply for a VA loan

Learn more about eligibility and VA loan applications

Get started today by getting a personalized evaluation of your home loan options from Freedom Mortgage.