Is it Easier to Qualify for a VA Home Loan vs. a Conventional Loan?

If you’re an active or retired military member, you may have the option of buying a home with a VA home loan instead of a conventional loan. In this case, you may be wondering which option is best for your situation. Is it easier to qualify for a VA loan? Do VA loans offer benefits that conventional mortgages do not? What can you expect for the process? These are all great questions.

Buying a home is a big decision and it’s important to know what you’re getting into. To help you better understand your options, we’ve provided a comprehensive comparison of VA loans and conventional mortgages.

VA Home Loan or Conventional Loan?

When comparing VA loans and conventional mortgages, it’s important to consider the pros and cons of each. Below, we’ve discussed down payments, fees, interest rates, and qualification requirements.

Down Payments

One of the major benefits of a VA home loan is that it doesn’t require a down payment. Not only can this help buyers save money, but it can also make it easier to qualify.

Lenders that offer conventional loans usually require larger down payments. And they’ll want to see proof of the funds before they approve your loan.

Fees

Closing costs and fees are different for VA loans than conventional mortgages. Typically, VA closing fees range in the 3-5% range. Closing costs for conventional loans are similar but can be as high as 6%. One major difference is that borrowers pay a VA funding fee for a VA home loan. This can be paid in cash or added to the total cost of the loan.

Interest Rates

Typically, VA home loans offer better interest rates. Right now, November 2021, the national average rate for a 30-year fixed VA loan rate is about 2.9%. In comparison, the average 30-year fixed interest rate for a conventional loan is 3.14%. Keep in mind, these rates fluctuate on a daily basis.

Debt-to-Income Ratio

Your debt-to-income ratio is also an important part of determining your eligibility. VA lenders prefer to see debt-to-income ratios no greater than 41%. For conventional loans, debt-to-income ratios can be as high as 50% depending on the lender’s requirements and the borrower’s situation.

Credit Score

Credit score requirements are also different for the two options.

The Department of Veterans Affairs does not set minimum credit score requirements. However, lenders can choose to have their own requirements. Usually, a lender will want to see a minimum credit score of at least 580 for a VA loan. This can be helpful for borrowers with bad credit or no credit.

Alternatively, most conventional loans require a credit score of at least 620.

Which Is Easier to Qualify for?

Because the requirements for down payments and credit scores are more relaxed, most military-affiliated borrowers have an easier time qualifying for a VA loan than a conventional mortgage. But sometimes there are exceptions. It all depends on the circumstances. The best way to know what you qualify for is to reach out to a lender who can walk you through the requirements.