VA Loan vs. Conventional Loans

November 28, 2024
Jesse Stroup
VA Learning Center

VA Loan vs. Conventional Loan: Which Is Right for You?

When it comes to buying a home, choosing the right loan program is one of the most important decisions you’ll make. For veterans, active-duty servicemembers, and their families in Idaho, the VA loan offers unique advantages. However, conventional loans can also be a good option in certain situations.

If you’re planning to buy a home in Boise, Meridian, or anywhere in Idaho, this guide will help you understand the key differences between VA loans and conventional loans so you can make an informed decision.

What Is a VA Loan?

A VA loan is a government-backed mortgage available exclusively to eligible veterans, active-duty servicemembers, and some surviving spouses. It’s designed to make homeownership more accessible by offering benefits such as no down payment and no private mortgage insurance (PMI).

What Is a Conventional Loan?

A conventional loan is not backed by a government agency. These loans are typically offered by banks, credit unions, or other private lenders. Borrowers usually need to meet stricter credit and income requirements to qualify.

Key Differences Between VA Loans and Conventional Loans

1. Down Payment Requirements

VA Loan: No down payment required. This makes it easier to purchase a home in Eagle, Nampa, or Caldwell without needing to save for years.
Conventional Loan: Requires a down payment, often between 3% and 20% of the home’s purchase price.

2. Private Mortgage Insurance (PMI)

VA Loan: No PMI required, regardless of the down payment amount.
Conventional Loan: PMI is required if you put down less than 20%, which adds to your monthly payment.

3. Credit Score Requirements

VA Loan: More flexible credit requirements. Even if your credit score isn’t perfect, you may still qualify.
Conventional Loan: Typically requires a credit score of 620 or higher, and higher scores may qualify for better interest rates.

4. Loan Limits

VA Loan: There is no official loan limit, but lenders may impose limits based on your financial profile. Borrowing above certain limits may require a small down payment.
Conventional Loan: Loan amounts are capped by conforming loan limits, which vary by location. In 2024, the limit is $726,200 in most of Idaho. The loan limits are updated every year.

5. Closing Costs

VA Loan: The VA limits how much you can be charged in closing costs, reducing your upfront expenses.
Conventional Loan: Closing costs vary and are not capped, often leading to higher upfront costs.

6. Funding Fee

VA Loan: Includes a one-time funding fee (waived for veterans with service-connected disabilities). This fee can be rolled into the loan amount.
Conventional Loan: No funding fee, but higher interest rates or PMI costs may apply.

7. Flexibility in Use

VA Loan: Must be used for a primary residence, such as a family home in Mountain Home or Meridian.
Conventional Loan: Can be used for primary residences, second homes, or investment properties.

Which Loan Is Right for You?

The choice between a VA loan and a conventional loan depends on your specific situation.

Choose a VA Loan If:
- You qualify based on your military service.
- You want to save money by avoiding a down payment and PMI.
- You need more flexible credit requirements.
Choose a Conventional Loan If:
- You’re purchasing a second home or investment property.
- You have a high credit score and a significant down payment saved.
- You don’t qualify for VA loan benefits.

How We Can Help

At Home Loans of Idaho, we specialize in helping veterans and homebuyers throughout Boise, Meridian, Eagle, and the surrounding areas choose the best loan program for their needs. Whether you’re leaning toward a VA loan or a conventional loan, our team will guide you every step of the way.

Not sure which loan is right for you? Let us help! Call 208-907-2846 or Click Here to get started with our friendly mortgage broker at Home Loans of Idaho. We’re here to help you achieve your homeownership goals!