The US mortgage industry is a veritable hive of activity. Every year, thousands of Americans successfully apply for mortgage loans to purchase their own home or to tap into their property’s equity. In 2024, the US mortgage industry was valued at $21 trillion in outstanding balances.
Over the past decade, this industry has experienced phenomenal growth. This is mainly due to the increasing average cost of homes (a.k.a. the average mortgage size), in conjunction with quantitative tightening/easing of lending standards.
A lower Federal Funds Rate (FFR) invariably causes lower mortgage rates down the line. This grows the outstanding balances of the mortgage industry. Higher interest rates have a tightening effect on the mortgage industry, resulting in contractions.
Increased interest rates in 2021/2022 resulted in the average mortgage rate jumping from under 3% to 6.8% plus. This hurt the mortgage industry, including VA loans and traditional loans. The market was suppressed by the high cost of housing and the high cost of credit. Fortunately, the downturn slowed in 2025 after the FFR cut rates by 25 basis points in September.
Homeownership remains a priority for many individuals and families across the United States, noteworthy among them veterans. VA loans are worthy of consideration for vets, service members, and family members. Once eligibility is established, VA loans tend to outperform traditional mortgages.
The following table contrasts VA loans with traditional mortgages
Key Differences Between VA Loans & Traditional Mortgages
Veterans and service members interested in VA home loan eligibility will be heartened to know that this option provides many practical benefits. The VA loan program is a government-backed pathway that prioritizes accessibility, fairness, and financial advantage. Here’s a side-by-side comparison of how they compare to traditional mortgages:
| Feature | VA Home Loans | Traditional Mortgages |
| Eligibility | VA Home Loans are reserved for eligible US veterans, active-duty service members, National Guard, reservists, and certain surviving spouses. | These home loans are available to the general public with qualifying credit, income, and debt-to-income ratios. Lenders require borrowers to comply with specific eligibility standards. |
| Down Payment | A quality VA loan often requires no down payment. This is one of the most significant advantages for qualified borrowers. | The typical home loan requires anywhere from 3% to 20% down, depending on the lender, credit profile, and loan program. Shop around for the best deals. |
| Private Mortgage Insurance (PMI) | No PMI required, even with 0% down. This presents as a significant benefit to veterans and eligible family members. | PMI is required for down payments under 20%, adding substantially to the monthly costs. |
| Interest Rates | Generally (not always) lower rates compared to a conventional loan. This is due to federal guarantees that reduce the lender’s risk. These cost savings are passed on to borrowers. | Interest rates vary by credit score and market conditions. But they are usually higher than comparable VA rates. For this reason, vets always pick VA home loans over traditional mortgages. |
| Credit Requirements | More flexible credit standards, and lenders often approve lower credit scores. This portends favorably for those who serve/d their country. | Stricter credit thresholds are in place. Higher credit scores typically secure better home loan terms. |
| Closing Costs | VA limits and regulates allowable closing costs; sellers may contribute to these costs. This is another big benefit for eligible and qualified applicants. | Borrowers pay the full range of lender and third-party fees unless negotiated differently. |
| Funding Fee | One-time VA funding fee replaces PMI. At top-rate lenders, this can be as low as 1%. Additionally, the funding fee may be included in the loan. | No funding fee, but recurring PMI or lender fees may apply. These add significantly to the costs over the life of the loan. |
| Refinancing Options | Streamlined VA IRRRL and cash-out options provide straightforward refinancing options for eligible and qualified borrowers. | Conventional refinancing requires full credit and income re-verification. |
| Long-Term Value | Builds equity quickly with lower costs and protection from predatory pricing techniques. The interests of veterans are safeguarded. | Builds equity steadily, but may result in higher lifetime interest and insurance expenses. |
Overall, VA loans offer much more than a valuable alternative to a standard mortgage. In a sense, they are a reward for service above self. As evidenced from the above table, these loans strip away the excess, minimize barriers, and open the door to homeownership.
Truthfully, traditional mortgages are hard-pressed to match the benefits of VA loans. For those who’ve earned the right, the VA loan remains one of the most powerful financial instruments for dropping anchor, building equity, and leaving a lasting legacy for the generations to come.
