VA Loan

A VA loan is a mortgage that is insured or backed by the Department of Veterans Affairs and made available to eligible servicemembers, veterans, or their surviving spouses.

Created by the G.I. Bill of 1944, VA loan programs offer lower down payment options, more lenient credit qualifying guidelines, and often interest rates that are better than most other loan programs.

Conventional vs. FHA

Conventional loans have more stringent qualifying criteria than FHA loans, especially when it comes to your credit. In addition to higher minimum credit score requirements, conventional loans typically require a longer look back into your credit history for derogatory events, like a bankruptcy, short sale, or foreclosure.

With conventional loans there are options to reduce, avoid, and remove private mortgage insurance premiums that are unavailable on FHA loans.

Conventional purchase loans may require as little as a 3% to 5% down payment on certain programs.

FHA loans, which are backed by the Federal Housing Administration, feature a low minimum down payment of 3.5%, more flexible credit qualifying criteria, and may require two types of mortgage insurance premiums. Learn more about FHA Loans here.

Conventional loans have specific requirements for your income, assets, and credit. Ideally, your debt-to-income ratio (DTI) would be less than 43%, with some exceptions based on compensating factors up to 50%.

In addition to your down payment funds and loan costs, certain conventional loan programs require you to have liquid assets available, called reserves. Typically, these are equal to a number of months of your housing expenses (including principal, interest, taxes and insurance). Loans for second homes and investment properties are more likely to have substantial reserve requirements of 6 to 24 months.

Many conventional loan programs have minimum credit score requirements of 620 or better, while the best pricing is reserved for higher scores. Learn more about credit scores here.

rivate Mortgage Insurance (PMI) is a fee assessed on conventional mortgages with less than 20% equity in the property. This insurance premium protects the lender/investor in the event of a default such as a short sale or foreclosure. It does not protect the homeowner however, so talk with a mortgage expert today about avoiding, reducing, or removing PMI on your next loan. Learn more about PMI here.