Conventional loan vs. VA loans are insured by the U.S. Department of Veterans Affairs, or VA. The VA doesn't lend money; it insures qualified lenders. ... VA loans also don't require borrowers to pay mortgage insurance, in contrast to conventional loans with less than 20 percent down and FHA loans.
For average interest rates, the winner is: VA Loans
Average mortgage rates on government-backed loans continue to outperform conventional loans, which surprises many homebuyers. But VA loans consistently lead the industry and have lower average interest rates than both conventional and FHA loans.
conventional financing over FHA financing because they feel the buyer is in a better financial position." ... In these markets, sellers might shy away from FHA buyers and choose instead to accept offers from buyers with conventional loans.
VA mortgage loans also come with minimum property requirements that can end up forcing home sellers to make many repairs. Because VA appraisals may increase their repair costs, home sellers sometimes refuse to accept purchase offers backed by the agency's mortgages.
Higher total mortgage insurance costs. Borrowers pay a monthly FHA mortgage insurance premium (MIP) and upfront mortgage insurance premium (UFMIP) of 1.75% on every FHA loan, regardless of down payment. A 20% down payment eliminates the need for PMI on a conventional purchase loan.
One of the big benefits of VA loans is that sellers can pay all of your loan-related closing costs. Again, they're not required to pay any of them, so this will always be a product of negotiation between buyer and seller.
You'll also find VA mortgage rules that close any loopholes that might allow an agent to charge fees appearing to be commissions even if not defined as such. Other costs that the VA prohibits buyers from paying include: Notary public fees. Recording fees (if $17 or more)
Sellers often believe, too, that buyers who need a lower down payment might not be able to afford any home repairs. Sellers worry that FHA buyers because of their lack of cash might be more willing to walk away from an offer if the home inspection turns up any problems. For FHA buyers, these are both cause for concern.
The biggest drawback of an FHA loan, however, is the mortgage insurance premium (MIP), which adds to a buyer's upfront costs considerably and to their monthly costs throughout the life of the loan.
There are two situations when a seller should choose a Conventional offer over an FHA offer. First, if the property has safety issues or things that need to be fixed, a Conventional appraisal will be less likely to point out those issues while an FHA appraiser will require those to be fixed prior to closing.
What Will Fail a VA Appraisal? In general, any visible health or safety concerns will pose an issue on a VA appraisal report. You won't be able to close on a home until these issues are resolved. In some cases, sellers are willing to cover the cost of essential repairs rather than lose the sale.
The short answer is “no.” It's true VA loans were once harder to close — but that's ancient history. Today, you're likely to have roughly the same issues with a buyer who has this sort of mortgage as any other. And VA's flexible guidelines may be the only reason your buyer can purchase your home.
On average, it doesn't take much longer to close on a VA loan than a conventional mortgage. However, eligibility status and VA appraisal issues can delay a VA loan closing significantly.
Yet No Comments