Many people are under the impression that a VA loan takes longer to process than a conventional. Actually, the time (at least for Baker and Lindsey, Inc.) is about the same. In fact, often the VA loan goes faster, and with fewer complications, than a conventional. Our record for a VA loan is two days, and it is not uncommon to go from application to closing in a week or two. The point is that the time anticipated for closing should not be a factor in deciding which type of financing is best for you. All types are about the same with respect to closing time.

The primary determinant in making this decision is downpayment; if you plan to pay 20% or more down (e.g. $20,000 down for a $100,000 purchase), then conventional financing is generally the most favorable with respect to cost, unless you are exempt from the VA funding fee (See section on VA loans.). However, it should be mentioned that VA qualifying guidelines are significantly more favorable to the borrower than conventional, and hence, even with 20% or more down, VA might make a purchase possible that otherwise could not take place. If you plan to make a downpayment of from 0% to 10%, and you are an eligible veteran, then VA is virtually always the best type of financing, unless you anticipate borrowing more than $203,000.

If VA is not available to you, then that leaves FHA or conventional.

The maximum FHA loan is as follows for these counties: Okaloosa - $124,874; Santa Rosa - $121,296; Walton - $121,900. If the loan for which you expect to apply exceeds these amounts, then that leaves conventional financing. If the FHA limits are within your anticipated needs, then there are a number of factors to consider.

FHA is an agency of the federal government which insures lenders against foreclosure, much in the same way that VA and private mortgage insurance companies do (although FHA was first by about 25 years for the latter and about 10 for the former).

Generally, meaning not always, the FHA guidelines are more relaxed than conventional; it is usually easier to qualify for an FHA loan. FHA will almost always result in a lower total cash requirement than conventional financing. Overall, the difference ranges from $500 to about $2,000, averaging (I would estimate) to around $1,500. The cost of the mortgage insurance is generally lower for a conventional loan, but not always.

As a general summary, I offer these guidelines for non-veterans: If you want to minimize the cash requirement and the loan amounts above fit your expectations, plan on FHA. If you can comfortably make a downpayment of 5% or more, plan on conventional.