What’s the difference between a VA and conventional loan?

Library | 11/13/2019

  

Buying a home is an exciting time, but most new homeowners focus more on home shopping and less on loan research. With many types of mortgage loans out there, it’s important to understand which options are available and which product will give you the best benefits. If you or your spouse is an active military service member or veteran, you may qualify for a Department of Veterans Affairs (VA) loan, adding one more option to your list. But what’s the difference between VA and conventional loans, and how do you know which is right for you?
 

Conventional Loans

Conventional loans are, by far, the most popular type of mortgage for all homebuyers, comprising nearly 74% of all new home sales in the first quarter of 2018. These loans are secured through a lender or mortgage broker and generally require a 20% down payment and good credit for competitive interest rates. Traditional 15- and 30-year fixed rate or adjustable rate mortgages can be available.
 

​VA Loans

VA loans are flexible, government-backed loans that come with significant benefits, opening the doors of homeownership to veterans who might otherwise not qualify for a conventional loan. VA loans have certain advantages over conventional loans, especially if you don’t have great credit or money saved up for a down payment. Key benefits of a VA loan include: 

  • Down payments as low as 0% 

  • No mortgage insurance required 

  • No minimum credit score requirement to qualify 

  • Competitive interest rates 

  • Stability of a 30-year fixed rate 

  • 60-day rate lock available 

 

​How does a VA loan work?

The VA will guarantee a particular amount of the loan so that the lender experiences less risk in issuing the loan. The amount of the guarantee varies depending on a number of factors. This guarantee can be applied toward the traditional 20% down payment, so that qualifying veterans can secure loans with low or 0% down. A VA loan might be your best choice if you’re eligible and: 

  • You don’t have money for a down payment 

  • Your credit score is fair or poor 

  • You plan to occupy the home 

 

What are the requirements for a VA Loan? 

VA loans are only available to service members or veterans who meet certain eligibility requirements. These include meeting the basic service requirements set by the VA, having a valid Certificate of Eligibility (COE) and satisfying the lender’s credit and income requirements. 

You may be eligible for a VA loan if: 

  • You’ve served 90 consecutive days of active service during wartime, OR 

  • You’ve served 181 days of active service during peacetime, OR 

  • You have 6 years of service in the National Guard or Reserves, OR 

  • You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability 

 

If you don’t meet any of these requirements, you may still be eligible – talk to one of our residential lending experts to find out. 

      

How to apply for a VA loan

If you’ve done your research and believe that a VA loan is right for you, here are four basic steps to start your application: 

  1. Familiarize yourself with the VA loan eligibility requirements  

  2. Contact a VA-approved lender like Valley Bank, and talk to an expert who can start your VA Loan application 

  3. Obtain your Certificate of Eligibility through your lender or on your own. Note: you or your lender should be able to easily obtain this for you through the VA’s online portal. 

  4. Finalize your loan application and provide all necessary paperwork to your lender, including W-2s, tax returns and additional financial information. 


A VA loan can be a great option for military service members, veterans, and their families, opening the door to the home of their dreams.  

 

If you're interested in a VA Loan, you can get started by contacting one of our residential lending experts today. Take advantage of your military service with a mortgage that gets you home. Veterans who are first time home buyers can receive up to $250 off closing costs when you make automatic mortgage payments from a new or existing Valley Checking Account.  

 
Valley's VA Mortgage Program
Supporting military service members

Valley's VA Mortgage Program

Take advantage of your military service with a mortgage that gets you home. With Valley's VA Mortgage Program, active service members and veterans can borrow up to 100% of their home value.

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