Best Mortgage Loans for First-Time Military Homebuyers

Serving in the military comes with a lot of benefits. That includes access to mortgages backed by the Department of Veterans Affairs (VA). If you serve for long enough, you can get a loan that the VA guarantees. That lowers risk for the lender, which translates into major perks for you. 

That’s not the only option on the table, either. A Conventional 97 loan gives you another low-down-payment option, as do USDA loans. And if you’re not in great shape financially, an FHA loan could be best. 

In short, when you’re a first-time military homebuyer, you have choices. The right one depends on a lot of factors that are specific to you. To help you drill down to the right kind of mortgage, let’s compare VA, FHA, USDA, and Conventional 97 loans.

Common mortgage loans for first-time military homebuyers

Broadly speaking, mortgages break into two categories: loans backed by government entities and loans that no government agency stands behind. Mortgage pros call the latter conventional loans. To help you understand all your options, let’s look at the types of mortgages that fall into each camp. 

Government-backed loans

Three federal agencies back mortgages: the U.S. Department of Veterans Affairs (VA), the U.S. Department of Agriculture (USDA), and the Federal Housing Administration (FHA). Each agency has different goals in wanting to support American homebuyers:

• FHA loans are designed to make homeownership more accessible to a broader range of Americans. That means they allow for lower credit scores and looser financial requirements than other types of mortgages. You can get an FHA loan with just 3.5% down if you have a credit score of 580 or above, for example. (For comparison, most mortgages require a credit score of 620+.) 
• USDA loans encourage people to buy in rural, sparsely populated areas along with some designated suburban areas. If you want to get a mortgage in an area that’s eligible, the USDA might guarantee your loan. These mortgages have household income limits, making them ideal for people and families with a low to moderate income. They also come with the major perk of a 0% down payment. 
• VA loans reward veterans and active-duty service members for their service by helping to make homeownership more accessible. In addition to a 0% down payment option, they tend to have lower interest rates than a lot of other types of mortgages. 

You don’t get any of these types of mortgages from the government agency behind them. Instead, you work with a mortgage lender. You just need to make sure they’re VA, USDA, or FHA-approved. 

Choosing a government-backed loan can offer some major advantages. If you’d otherwise have trouble getting approved for a mortgage, an FHA loan could help you become a homeowner. If you want to buy in one of the areas the USDA covers, their backing can help to make your loan easier to get. Or if you’ve met the military service requirement, VA loans are typically the best kind of mortgage for you. 

Conventional loans

If you haven’t met the military service requirement, VA loans aren’t on the table for you. Even if you have, it’s still worth comparing options. While VA loans typically offer the most financial upside for first-time military homebuyers, every person’s situation is unique. 

If you’re comparing mortgage options and you want a low down payment, look at the Conventional 97, an option for first-time homebuyers. This mortgage allows for a 97% loan-to-value (LTV) ratio. That means you can borrow up to 97% of what you need, meaning you only have to put 3% down. 

Pros and cons: VA vs. FHA vs. Conventional 97 vs. USDA

Clearly, you have choices. Let’s hit some key points about each of them to help first-time military homebuyers decide what’s best for them:

If you’re a first-time military homebuyer, start by checking if you’re eligible to get a VA loan. In most cases, if you served 90 days during wartime or 181 days during peacetime, you are. 

If VA loans are on the table for you, they typically help you get a lower-than-average interest rate paired with a 0% down payment. As a first-time buyer, you’ll have your full entitlement to use, which helps you max out the benefits there. 

That said, don’t put all your eggs into one basket. Check out what kind of offers you get with different kinds of mortgages, too. If you want to buy in a rural area, for example, a USDA loan could be competitive with a VA loan. 

To help you compare your options on the VA loan front, we have live rates from leading VA lenders. Our goal is to help first-time military homebuyers. Start shopping today.