The U.S. government created a military loan guarantee program in 1944 to help the service members with their home purchase. Since inception, VA loans have helped approximately 20 million veterans in buying a house of their own. VA loans come with several advantages that the conventional loans fail to offer. This is one of the reasons why ex and current servicemen don’t look for other conventional loan deals when they see the fair chances of approval of Texas veterans home loans.
Differentiating Between VA Loan & Conventional Loan
VA loan is probably the most effective and unique loan program in the US. Let’s see how it is better from the traditional mortgages.
|VA Loan||Conventional Loan|
|No down payment required||Up to 20 percent down payment|
|Qualified borrowers don’t have to make any down payment while availing the VA loan.||A borrower is usually required to pay up to 20 percent of the total value of the property to avail conventional loan.|
|No PMI||PMI Required|
|There’s no need to buy a Private Mortgage Insurance (PMI) since the VA loan is backed by government.||If a borrower gets more than 80 percent of the property’s value financed from the bank or an insurance company, he needs to have a PMI.|
|Easy Qualification Criteria||Standard Procedure|
|Banks have less stringent VA loan qualification standards as these are backed by government. So, getting a VA loan is easy.||Strict qualification criteria at times make it really tough for the individuals to get the loan approved smoothly. Also, a bad credit score can nullify the chances of getting the loan, which is rarely seen in case of VA loan.|
|Low Interest Rate||Higher Interest Rate|
|Due to government backing, VA loan is a low risk loan and banks offer more competitive interest rate on them in comparison to the conventional loan.||The level of risk, non-payment, defaulting and bankruptcy is higher in traditional mortgage loan. So, banks charge higher interest on this type of loan.|
|No Prepayment Penalty||Prepayment Penalty May Exist|
|If you decide to pay off the VA loan before it matures, it won’t invite an extra penalty. So, borrowers can consider future home purchase and other refinancing options after paying off one debt.||A borrower might have to pay prepayment penalty on early pay off of the conventional loan because the lender will miss out the opportunity of collecting interest payment until the loan matures. Penalty is a way of recouping some of the interest money.|
Those who are eligible for a VA loan should go for it because there is no better and more financially rewarding opportunity than this. All that they need to do is go through the eligibility criteria, get the documents ready and fill up the application form.