Purchasing a home is probably the biggest investment you’ll make in your life. Therefore, it’s imperative you select the appropriate mortgage from the beginning. You have numerous kinds of loans from which to choose, including conventional and VA and each has a unique set of prerequisites.
When it comes to a conventional loan, the federal government doesn’t guarantee or ensure it and it conforms to the limits stipulated by Fannie Mae and Freddie Mac.
On the other hand, the federal government guarantees VA loans with the aim of making a home purchase more affordable for low-to-middle income families by providing low down payments.
If you’re uncertain about the loan to secure, our personnel are eager to guide you through the various products so you can make an informed decision. If you’re debating between a conventional and VA loan, here’s a detailed comparison.
We typically inform our clients that the kind of property they’re purchasing can be a major factor in deciding between a VA and conventional loan. If you’re considering a VA loan, keep in mind that the house should be your primary residence. Therefore, if you’re purchasing it for other reasons, we recommend you take the conventional loan instead.
On the other hand, a conventional mortgage allows you do as you wish with the property. For instance, you can turn it into a rental, live in it, or it can function as a vacation home. In the event that you opt for the VA loan, FHA home loans Fort Lauderdale will require you to issue an eligibility certificate. You can obtain the certificate once you verify your eligibility for this type of loan.
A major advantage of securing a VA loan is that it doesn’t require down payment. Therefore, it eliminates the need to wait several years just to save for the down payment. Instead, you can make an immediate purchase, save on rent, and begin building equity.
Nevertheless, it’s important to note that a lender may require a down payment in the event that a property’s purchase price is higher than the existing market value. This can take place in competitive markets facing a multiple-bid situation.
When it comes to conventional loans, lenders have traditionally favored bigger down payments. These days, however, you can access conventional loans with down payments as low as 3%.
For a VA-insured loan, we’ll expect you to pay a funding fee, which helps defray the cost of default loans. The one-time upfront fee is between 1.25% and 3.3% of the loan, depending on the branch and length of military service, your down payment, and whether you’ve used your VA loan benefit previously.
The fee is frequently included in the loan, making your payment higher and adds to the interest you’ll pay over the loan’s life. Veterans who are eligible for disability pay because of service-related health issues are exempt from this fee.
VA loans can’t have prepayment penalties, and they’re all assumable loans. Both features can make it easier for you to sell a home funded with a VA loan because most conventional loans aren’t assumable and comprise a paid-in-full clause if you sell the home.
Keep in mind that you can transfer an assumable loan to a buyer, enabling the owner to take over the existing mortgage without having to take out a new one. If you secure a conventional mortgage, beware of possible prepayment penalties, which can result in extra fees in the event that you wish to sell or refinance the property in the loan’s early years.
When it comes to VA loans, the FHA loan rates in Fort Lauderdale, Fl are lower than what you would obtain from a conventional mortgage. For a fixed 30-year rate loan, VA loans had a 3.76% average rate in 2016 compared to 3.76% on a conventional loan for a similar term.
If you issue less than 20% down payment, a conventional mortgage will need private mortgage insurance, which protects lenders in the event that you default. You could pay it as a one-time charge at closing or as a continuing fee that’s included in your monthly payment, or even as a combination. On the other hand, VA loans don’t need mortgage insurance.
When it comes to deciding between the two loan types, it’s a personal decision. Nevertheless, you want to ensure it’s an informed one.