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Updated: October 2, 2024
This guide to Conventional vs VA mortgages compares two popular mortgage types among first-time home buyers to help you choose the best mortgage loan for your upcoming purchase.
Choosing the right mortgage is crucial for home buyers. The two common mortgage types for many buyers, Conventional and VA (Veterans Affairs) mortgages, have several similarities and differences.
When purchasing a first home, it is important to finance it with the optimal mortgage for your finances and future. Two popular mortgage options for first-time buyers are Conventional mortgages and VA mortgages. While they share several traits, they also have key differences.
Conventional mortgages are backed by Fannie Mae or Freddie Mac under the Federal Housing Finance Agency (FHFA). They come in two varieties: conforming and non-conforming. Conforming mortgages are conventional loans falling within the FHFA’s mortgage loan limits, whereas non-conforming mortgages, often termed jumbo loans, exceed these limits.
Conventional mortgages offer fixed-rate options such as 30-year, 20-year, and 15-year terms, as well as adjustable-rate mortgage options.
Qualification criteria for conventional mortgages typically include:
VA loans, guaranteed by the Department of Veterans Affairs, are available exclusively to active duty military, veterans, and eligible surviving spouses. VA loans offer benefits such as no down payment and no private mortgage insurance, which help with homeownership. However, VA loans do require a Funding Fee, which can be paid upfront or financed into the loan.
VA mortgages are available as 30-year and 15-year fixed-rate loans, or as adjustable-rate mortgages. VA loans do not have specific loan limits.
Key VA loan features include:
VA mortgages generally offer more favorable loan terms than conventional loans, especially for those with limited down payment funds or lower credit scores.
| Loan Feature | Conventional | VA |
| Minimum Loan Size Allowed | None | None |
| Maximum Loan Size Allowed | See Loan Limits | None |
| Maximum Household Income Allowed | No Restrictions | None |
| Minimum Credit Score Required | 620 | None |
| Debt-to-Income Maximum - Standard | 50.00% | 41.00% |
| Debt-to-Income Maximum with Compensating Factors | 50.00% | None |
| Minimum Downpayment Required | 3.00% | None |
| Maximum Loan-To-Value Allowed | 97.00% | 100% |
| Maximum Combined Loan-to-Value Allowed | 105% | 100% |
| First-Time Homebuyer Education Required | No | No |
| Minimum Age Allowed | Minimum Legal Age | Minimum Legal Age |
| Maximum Age Allowed | None | None |
| First-Time Home Buyers Allowed | Yes | Yes |
| First-Time Home Buyers Only | No | No |
| Low-Down Payment Mortgage Classification | No | Yes |
| Income Verification Required | Yes | Yes |
| Military Service Required | No | Yes |
| States Allowed | All States | All States |
| Homeowners Insurance Required | Yes | Yes |
| Escrow Taxes & Insurance Required | Recommended | Yes |
| Loan Feature | Conventional | VA |
| Average Interest Rate: Last Year | 4.97% | 4.72% |
| Average Loan Size: Last Year | $402,642 | 371,121 |
| Average Approval Rate: Last Year | 70.51% | 76.33% |
| Market Share: Last Year | 69.70% | 10.63% |
| Purchase Mortgages Originated: Last Year | 3,442,038 | 525,022 |
| Loan Feature | Conventional | VA |
| 1-Year ARM Available | Yes | No |
| 5-Year ARM Available | Yes | Yes |
| 10-Year Fixed-Rate Mortgage Available | Yes | Yes |
| 15-Year Fixed-Rate Mortgage Available | Yes | Yes |
| 20-Year Fixed-Rate Mortgage Available | Yes | Yes |
| 25-Year Fixed-Rate Mortgage Available | No | Yes |
| 30-Year Fixed-Rate Mortgage Available | Yes | Yes |
| Temporary Buydowns Available | Yes | No |
| Loan Feature | Conventional | VA |
| Funding Fee / Guarantee Fee | No | Yes |
| Upfront Mortgage Insurance Premium | No | No |
| Annual Mortgage Insurance Premium | No | No |
| Private Mortgage Insurance | Yes | No |
| Loan Feature | Conventional | VA |
| Primary Residence | Yes | Yes |
| Second Home | Yes | No |
| Vacation Home | Yes | No |
| Investment Property | Yes | No |
| Non-Occupant Co-Borrower | Yes | No |
| Loan Feature | Conventional | VA |
| U.S. Citizen Allowed | Yes | Yes |
| Permanent Resident Alien Allowed | Yes | Yes |
| Non-Permanent Resident Alien Allowed | Yes | No |
| Foreign National Allowed | Yes | No |
| Buyers With Diplomatic Immunity Allowed | Yes | No |
| Loan Feature | Conventional | VA |
| Credit Scoring Model | Tri-merge | Tri-Merge |
| Non-Traditional Credit References Allowed | Yes | Yes |
| Deferred Student Loans | Lesser of 5% of balance or monthly payment | N/A for Deferral of 12+ Months |
| Deferred Debt Calculation | Lesser of 5% of balance or monthly payment | 5% of balance or monthly payment |
| Pay Off Medical Collections Prior To Closing | Not Required | No |
| Pay Off Non-Medical Collections Prior To Closing | Not Required | No |
| Bankruptcy, Chapter 7 | 2-Year Waiting Period | 2-year waiting period |
| Bankruptcy, Chapter 13 | 4-Year Waiting Period | 12-month waiting period |
| Short Sale | 4-Year Waiting Period | 2-year waiting period |
| Foreclosure | 7-Year Waiting Period | 2-year waiting period |
| Judgments & Liens Allowed | Must be satisfied | Yes |
| Federal Income Tax Delinquency Allowed | Must be satisfied | No |
| Loan Feature | Conventional | VA |
| Minimum Square Footage Allowed | No minimum | No minimum |
| Maximum Square Footage Allowed | No maximum | No maximum |
| Single-Family Residences Allowed | Yes | Yes |
| Condominiums Allowed | Yes | Yes |
| Non-Warrantable Condominiums Allowed | No | No |
| Co-ops Allowed | Yes | No |
| Townhomes Allowed | Yes | Yes |
| 2-4 Unit Homes Allowed | Yes | Yes |
| Manufactured Homes Allowed | Yes | Yes |
| Fraternity and Sorority Houses Allowed | No | No |
| Tiny Homes Allowed | Yes | No |
| Modular Homes Allowed | Yes | Yes |
| Cob Homes Allowed | No | No |
| Shipping Container Homes Allowed | Yes | No |
| Condotels Allowed | No | No |
| Bed & Breakfast Allowed | No | No |
| Working Farms Allowed | No | Yes |
| Working Ranches Allowed | No | Yes |
| Houseboats Allowed | No | No |
| Log Homes Allowed | No | Yes |
| Geodesic Homes Allowed | No | No |
| Timeshares Allowed | No | No |
| Homes with Solar Panels Allowed | Restricted | Yes |
| 3-D Printed Homes Allowed | Yes | No |
| Leasehold Estates Allowed | Yes | Yes |
| Mixed-Use Properties Allowed | No | Yes |
| Flood Zones Allowed | Only where insurable | Yes |
| Properties With More Than 20 Acres Allowed | No | Yes |
| Properties with PACE Allowed | No | Yes |
| Loan Feature | Conventional | VA |
| Inter Vivos Revocable Trust Allowed | Yes | No |
| Closing in a Corporation Allowed | No | No |
| Community Land Trust Allowed | Yes | Yes |
| Non-Profit Organizations Allowed | No | No |
| Municipal Government Agencies Allowed | No | Yes |
| Loan Feature | Conventional | VA |
| W-2 Income Allowed | Yes | Yes |
| Self-Employment Income Allowed | Yes | Yes |
| Investment Income Allowed | Yes | Yes |
| Retirement Income Allowed | Yes | Yes |
| Trust Income Allowed | Yes | Yes |
| Social Security Income Allowed | Yes | Yes |
| Military Income Allowed | Yes | Yes |
| Rental Income Allowed | Restricted | Yes |
| Asset Depletion as Income Allowed | Yes | Yes |
| Offer Letter Income Allowed | Yes | Yes |
| Disability Income Allowed | Yes | Yes |
| Alimony and Child Support Income Allowed | Yes | Yes |
| Boarder Income Allowed | No | Yes |
| Accessory Dwelling Unit Income Allowed | No | Yes |
| Cannabis Industry Income Allowed | Yes | No |
| Automobile Allowance as Income Allowed | Yes | Yes |
| Housing Allowance as Income Allowed | Yes | Yes |
| Temporary Leave Income Allowed | Yes | Yes |
| Bank Statements as Income Allowed | No | No |
| Debts Paid By Others as Income Allowed | Yes | No |
| Loan Feature | Conventional | VA |
| Seasoning Requirements | 60 Days | 60 days |
| Reserves Required | No | No |
| Cash Gift For Downpayment Allowed | Yes | Yes |
| Seller Concessions, Maximum | 3.00% | 4.00% |
| Salary Advance for Downpayment Allowed | No | Yes |
| Relocation Funds for Downpayment Allowed | Restricted | Yes |
| Gift of Equity Allowed | Yes | Yes |
| Sweat Equity Allowed | Yes | No |
| Crypto for Downpayment Allowed | Yes | Yes |
| Cash Value For Credit Card Rewards Allowed | Yes | No |
| Cash Value For Airline Rewards Allowed | Yes | No |
| Loan Feature | Conventional | VA |
| Assumable Mortgage Allowed | No | Yes |
| Trailing Co-Borrower Allowed | Yes | Yes |
| Maximum Properties Financed Allowed | 10 | Unlimited |
| Flipped Homes Allowed | Restricted | No |
| Arms-Length Transaction Required | Yes | No |
| Occupancy Deadline | 60 days | 60 days |
| Delayed Financing Allowed | Yes | No |
| Prepayment Penalty Allowed | No | No |
| Termite Inspection Required | No | Yes |
| Power of Attorney Allowed | Yes | Yes |
| Repair Allowances Allowed | No | No |
| Gifts From Charitable Organizations Allowed | No | Yes |
This comparison between conventional and VA mortgages is based on official mortgage guidelines from the FHFA and VA. These guidelines are subject to change if mortgage guidelines are updated.
Additionally, individual mortgage lenders may apply variations of these guidelines, called lender overlays, which can affect mortgage approvals.
If one lender denies your conventional or VA mortgage application, it does not mean all lenders will do the same. Different mortgage companies have different eligibility criteria, so it may still be possible to get approved with another lender.
It is recommended to consult with multiple lenders to explore your mortgage options.
Check your eligibility and begin your application now.
Want to make an informed decision? Explore more by visiting our comprehensive Conventional Mortgage and VA Mortgages guides. When you’re ready to move forward, begin your mortgage pre-approval at Homebuyer.com.
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