When you decide to use a VA Loan, you may be excited about the prospect…
There are many home loan types out there: VA, conventional, USDA, and FHA. What is the difference? Is the VA Loan a type of conventional mortgage?
The Conventional Mortgage
No, the VA Loan is different from a conventional mortgage. Anyone can apply for a conventional mortgage. Typically, the lender will require that you put 20% down and meet their requirements for debt-to-income ratio and credit history. They will also consider the amount that you plan to borrow when approving or disapproving your loan application. Many borrowers talk to a lender early in the home search process to get preapproved and know how much they will be able to qualify for and borrow.
The VA Loan
The VA Loan, on the other hand, does not require a down payment. You will provide the same documentation for your debt-to-income ratio, credit history, employment, and potential home purchase and need to be approved by your lender. Many lenders offer both conventional and VA Loans to their customers. If you are eligible for the VA Loan, however, the main difference is that it does not require a down payment. This can be a big deal, especially if you live in a high cost of living area. Rather than take years to save up enough money to make a sizable down payment, you can use your VA Loan entitlement to purchase a home to live in much sooner.
Keep in mind that you will need to qualify when you use a VA Loan, just like you would a conventional loan. You can get a preapproval letter from your lender before you start house shopping, just like you would with a conventional loan. If you plan to use your VA Loan, make sure that you let your lender know early in the process so that they can provide you with the most accurate estimates possible.