Conventional Loan Benefits for Veterans in Arkansas

Conventional Loan

Conventional Loan Benefits for Veterans in Arkansas

Reviewed by the HomeMath editorial team Updated 2026-08-04

Key takeaways

Conventional loans offer a path to homeownership without the upfront funding fees associated with VA-backed loans.
Borrowers with strong credit scores may find conventional financing more cost-effective if they have a down payment of at least 20%.
Arkansas home buyers can leverage the Arkansas Development Finance Authority (ADFA) programs to assist with down payments even when using conventional products.
Conventional loans allow for the removal of private mortgage insurance (PMI) once the loan-to-value ratio reaches 80%.

Why Veterans Consider Conventional Loans

While the VA loan program is often the first choice for veterans due to its zero-down-payment requirement, conventional loans offer distinct advantages in specific financial scenarios. A conventional loan is a mortgage not insured or guaranteed by the federal government. Because these loans are held by private lenders and often sold to government-sponsored enterprises like Fannie Mae or Freddie Mac, they follow standardized guidelines for credit and income.

The Benefit of Avoiding Funding Fees

VA loans require a mandatory funding fee, which can range from a small percentage to a significant portion of the loan amount depending on the veteran's service history and down payment size. This fee is often rolled into the total loan balance. By choosing a conventional loan, veterans avoid this fee entirely. For veterans who have the liquid assets for a down payment, the long-term interest savings from a smaller loan balance can outweigh the benefits of a zero-down VA loan.

Private Mortgage Insurance and Equity

A primary concern with conventional loans is private mortgage insurance (PMI), which is required if your down payment is less than 20%. However, unlike the VA funding fee, which is a sunk cost, PMI is temporary. Once you have built enough equity in your home—typically when the loan balance drops to 80% of the home's original appraised value—you can petition your lender to cancel the PMI. This provides a clear financial milestone to lower your monthly housing costs.

Leveraging Arkansas State Resources

Veterans in Arkansas can utilize state-specific programs to supplement their homebuying power. The Arkansas Development Finance Authority (ADFA) offers various programs that provide down payment and closing cost assistance. These programs are often compatible with conventional financing, allowing veterans to combine the speed and flexibility of a conventional loan with state-backed support to reduce the cash needed at closing. Arkansas is a state where real estate closings typically involve a title company, and understanding local property tax assessments is crucial for calculating your long-term monthly payment.

Strategic Flexibility

Conventional loans are often preferred in competitive markets because sellers sometimes perceive them as having fewer appraisal or inspection hurdles than government-backed loans. If you are looking at properties that might not meet the strict minimum property requirements (MPRs) set by the VA, a conventional loan may offer the flexibility needed to close the deal. This is particularly relevant for veterans looking to renovate older homes in historic districts found throughout Arkansas.

This information is for educational purposes and does not constitute financial, legal, or mortgage advice. Mortgage guidelines, state-specific programs, and eligibility requirements change frequently. You should consult with a licensed mortgage loan officer or a financial advisor to discuss your specific credit profile and financial goals.

FAQ

Can I use a conventional loan if I have already used my VA loan benefit?

Yes. Conventional loans do not impact your VA loan entitlement, and you can hold both types of loans simultaneously. This is a common strategy for veterans who turn their current home into a rental property and purchase a new home using a conventional loan.

Is the credit score requirement higher for a conventional loan than a VA loan?

Generally, yes. While VA loans are known for being more lenient with credit scores, conventional lenders typically look for a score of 620 or higher to qualify. A higher score often results in more favorable interest rates and lower PMI premiums.

Does Arkansas offer special property tax exemptions for veterans?

Arkansas provides a disabled veteran property tax exemption for those who have a 100% service-connected disability rating. This exemption can be a significant financial benefit that lowers your total housing cost regardless of your loan type.

What is the minimum down payment for a conventional loan?

First-time homebuyers can often qualify for conventional loans with as little as 3% down. However, putting down less than 20% will trigger the requirement for private mortgage insurance until your equity increases.

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