VA vs. Conventional Loan
For an eligible veteran a VA loan usually wins outright — no down payment, no PMI, lower rates. A conventional loan is the move when you aren't eligible or want a second home.
If you’re eligible for a VA loan, it almost always beats a conventional loan — zero down payment, no monthly mortgage insurance, and typically a lower rate. Reach for a conventional loan when you aren’t VA-eligible, want a second home or rental, or have 20% down and strong credit and would rather skip the VA funding fee. Eligibility is the first fork; everything else follows from it.
Run your numbers on the VA Loan Calculator and the Mortgage Calculator to see the monthly gap.
VA vs conventional at a glance
| VA loan | Conventional loan | |
|---|---|---|
| Who qualifies | Eligible veterans, active duty, some surviving spouses | Anyone who qualifies on credit and income |
| Down payment | $0 | 3% minimum |
| Monthly mortgage insurance | None, ever | PMI below 20% equity (cancellable) |
| One-time cost | VA funding fee, 1.25%–3.3% | none (PMI is monthly instead) |
| Credit score | Flexible (lenders often ~620) | ~620+ |
| Property use | Primary residence only | Primary, second home, or rental |
How a VA loan works
A VA loan is guaranteed by the Department of Veterans Affairs and offered to eligible service members, veterans, and some surviving spouses. The guarantee lets lenders offer terms no other program matches: no down payment, no private mortgage insurance, and competitive rates, even with a moderate credit score.
The one real cost is the VA funding fee — a one-time charge, usually 1.25% to 3.3% of the loan, that can be rolled into the balance. It’s waived entirely for veterans with a service-connected disability. Because there’s no monthly insurance, that single fee often costs far less over time than years of conventional PMI. Price it exactly with the VA loan calculator.
For most buyers with full entitlement there’s no VA loan limit — you can borrow whatever you qualify for without a down payment, though very large loans may need one.
How a conventional loan works
A conventional loan has no military requirement and follows Fannie Mae and Freddie Mac guidelines. It needs at least 3% down and, below 20% equity, charges PMI — which cancels once you cross 20%. Its big advantage over VA is flexibility: you can use it for a second home or an investment property, which VA loans do not allow.
The real trade-off: funding fee vs. no down payment + PMI
For an eligible buyer the math is usually lopsided. A conventional loan asks for a down payment and, if you put less than 20% down, monthly PMI on top. A VA loan asks for neither — just the one-time funding fee. On a typical purchase, skipping both the down payment and years of PMI outweighs the funding fee by a wide margin. The main reason an eligible veteran picks conventional is to preserve VA entitlement, avoid the funding fee with 20% down, or buy a property VA won’t cover.
When a VA loan wins
- You’re eligible and buying a primary residence
- You have little or no down payment saved
- Your credit is fair rather than excellent
- You have a service-connected disability (funding fee waived)
When a conventional loan wins
- You aren’t eligible for a VA loan
- You’re buying a second home or investment property
- You have 20% down and strong credit, and want to skip the funding fee
- You want to keep your VA entitlement in reserve
The bottom line
If you’ve earned VA eligibility, start there — the combination of no down payment, no PMI, and low rates is hard to beat, and the funding fee is usually the cheaper deal over the life of the loan. Go conventional when you’re not eligible or need the flexibility VA doesn’t offer. Compare both, plus FHA, on the VA loan calculator and the conventional mortgage calculator.
This guide is general educational information, not financial advice. Confirm specifics with a licensed lender or advisor.