VA Loan or Conventional Loan?

[Anonymous]

Hello everyone,

We're in the process of looking for our first home, and just heard back from our mortgage company that we were preapproved for a conventional loan at $280,000. However, my husband has VA benefits available and they're going to rerun it through as a VA loan to see what our preapproval looks like with those benefits. The housing market where we live is absolutely brutal and there is nothing on the market at that purchase price that would work for us.

My question is - will the VA loan give us the possibility of a larger loan amount? We're totally new to the mortgage world and want to make sure we have as much information as possible before we proceed.

Thanks in advance!

[Anonymous]

Im not sure about the larger purchase price but our realtor did give us the warning that if it goes into multiple bids, our VA loan may not be as appealing since we werent having to put anything down and there are certain things that VA Loans require and others types do not. That wasnt the case for us, fortunately, Im not sure what market you're in but from what I've read on here - places like Cali are super hot. 

[Anonymous]

We're in Colorado and the market is insane where we are. 

That's a good point I hadn't thought of...thank you!

[VALoanMaster]

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@Anonymous wrote:

Hello everyone,

We're in the process of looking for our first home, and just heard back from our mortgage company that we were preapproved for a conventional loan at $280,000. However, my husband has VA benefits available and they're going to rerun it through as a VA loan to see what our preapproval looks like with those benefits. The housing market where we live is absolutely brutal and there is nothing on the market at that purchase price that would work for us.

My question is - will the VA loan give us the possibility of a larger loan amount? We're totally new to the mortgage world and want to make sure we have as much information as possible before we proceed.

Thanks in advance!

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Hi @Anonymous,

VA will give you more buying power VS a conventional loan.

Here's an example:

I'm making the following assumptions:

1) Your mid score is 740+

2) You were pre-approved for a conventional loan with 5% down.

3) You husband's VA funding fee is 2.4%.

Now given these assumptions, here's what you're looking at.

On a conventional loan with 5% down, ($266,000) your estimated principle, interest and PMI payment would be $1,239.67.
On a VA loan at $300,000 with a 2.4% funding fee, your estimated principle and interest payment would be $1,254.12. 

That's a increase of just $14.45 per month to borrow $41,200 MORE! 

The other thing that makes VA a better option in terms of buying power is your debt to income ratio can be much higher compared to a conventional loan which caps out at 50%.

One more thing that can help increase your buying power is to take the money you were going to put down on a conventional loan ($14,000) and use that to pay off other debt.

[Anonymous]

I'd absolutely do a VA loan. Rates are typically lower if your husband receives any sort of compensation from the VA funding fee is waived and no down payment. You can stil opt to put a downpayment. 

downside is if you ever want to use it as rental property you would have to refinance as VA loans can only be used for your primary residence. Also you cannot waive the appraisal with a VA loan. 

[VALoanMaster]

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@Anonymous wrote:

I'd absolutely do a VA loan. Rates are typically lower if your husband receives any sort of compensation from the VA funding fee is waived and no down payment. You can stil opt to put a downpayment. 

downside is if you ever want to use it as rental property you would have to refinance as VA loans can only be used for your primary residence. Also you cannot waive the appraisal with a VA loan. 

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Hi @Anonymous,

That's not totally true. You cannot buy a rental property with a VA mortgage but you can convert your primary residence (with a VA loan on it) in to a rental. You can even do a VA IRRRL refi on that same mortgage after you turn it to a rental.