The government provides home buyers with reduced down payment requirements and assists them in purchasing a home. Since such loans often come with several additional requirements, this could potentially slow down the application process for some or put them at a disadvantage in a competitive environment.

This can disadvantage buyers in a seller’s market, so the government may need to step in and impose changes in order to compete with buyers who have conventional home loans versus a Department of Veterans Affairs (VA) home loan or a home loan backed by the Federal Housing Administration.

Because government-backed mortgages typically do not require a down payment, first-time homebuyers and those with low incomes have been able to get into the housing market more efficiently.

If your credit is good and you have a steady income, you might be eligible for a conventional loan. Taking advantage of these loans will provide you with greater flexibility and may cost you less per month than other types of loans. Since government loans are generally affordable, they're a good choice for many.

A loan of this type makes homeownership more accessible to borrowers with lower incomes and lower credit scores since it makes homeownership more affordable for them.

Either way, it is likely that a large number of veterans have the misconception that VA loans are not the same as conventional loans, believing they are entirely different from one another from the start. The VA has reported that lenders often offer veterans products different from the VA loan, which is in the bank's interest rather than the veteran's.

Essentially, VA loans are more time-consuming, and there is more work involved in processing them than conventional loan packages. As a result, lenders suffer a lot more losses, Wynant says.

To stand out in the crowd, some buyers with government-backed offers are putting more cash into an earnest money account to demonstrate their strong commitment to closing the house.