This guide to Conventional vs VA mortgages compares two popular mortgages among first-time home buyers to help you choose the best mortgage loan for your upcoming purchase.
The Differences Between Conventional and VA Mortgages
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 you’re buying your first home, you want to finance it with the optimal mortgage for your finances and future. The two popular mortgages for first-time buyers – the Conventional mortgage and the VA mortgage – share a lot of traits. They’re also quite different.
Highlights: Conventional Mortgage
Conventional mortgages are mortgages backed by Fannie Mae or Freddie Mac under the Federal Housing Finance Agency (FHFA). Conventional mortgages come in two varieties: conforming and non-conforming. Conforming mortgages are conventional mortgages falling within the FHFA’s mortgage loan limits, whereas non-conforming mortgages, often termed jumbo mortgages, exceed these limits.
Conventional mortgages are available with fixed-rate options of 30-year, 20-year, 15-year, and adjustable-rate mortgage options, too.
Conventional mortgage qualification criteria typically include:
- A down payment of at least 3 percent
- A verified source of income
- A minimum credit score of 620
- Loan sizes within local mortgage limits
- Structurally sound and habitable homes
Highlights: VA Mortgage
VA loans, guaranteed by the Department of Veterans Affairs, are exclusively available to active duty military, veterans of the armed forces, and eligible surviving spouses. VA loans offer benefits including no down payment options and no private mortgage insurance to assist in homeownership.
VA mortgages are available as 30-year and 15-year fixed-rate mortgages, or adjustable-rate. There are no loan limits for VA loans.
Key VA loan features include:
- No down payment required in most cases
- No private mortgage insurance (PMI) needed
- More lenient credit requirements compared to conventional loans
- Eligibility for primary residences only, not for investment properties
- Assumability clause for future home buyers
VA mortgages offer more favorable loan terms than conventional loans, especially for those with limited down payment capabilities or less-than-perfect credit.
Mortgages At-A-Glance
| 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% | 1 |
| Maximum Combined Loan-to-Value Allowed | 1.05 | 1 |
| 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 |
Compare Mortgage Statistics
| 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 |
Compare Mortgage Products
| 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 |
Compare Mortgage Insurance
| 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 |
Compare Occupancy Rules
| 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 |
Compare Citizenship Rules
| 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 |
Compare Credit Rules
| 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 |
Compare Property Rules
| 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 |
Compare Ownership Rules
| 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 |
Compare Income Rules
| 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 |
Compare Assets & Downpayment Rules
| 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 |
Compare Loan Traits
| 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 |
Sources: FHFA, Department of Veterans Affairs
Important Notice For Home Buyers
This mortgage comparison between conventional and VA mortgages is based on official mortgage guidelines from the FHFA and VA and is subject to change should mortgage guidelines change.
Furthermore, Individual mortgage lenders may use variations of these guidelines, called lender overlays, which may affect a mortgage approval.
If one lender turns down your conventional or VA mortgage application, it does not necessarily mean all mortgage lenders will turn down your application. Different mortgage companies use different eligibility criteria, and getting approved with another lender may be possible.
Consult with multiple lenders to explore your mortgage choices.
Find Out More: Conventional vs VA Mortgages
Want to make an informed decision? Dive into details by visiting our comprehensive conventional Mortgage and VA mortgages guides. And when you’re ready to move forward, start your mortgage pre-approval at Homebuyer.com.
Pre-approved buyers do better. Get started now.
