VA Loan vs Conventional Mortgage: Which Is Better?

The bottom line

For eligible borrowers, the VA loan almost always wins. It offers 0% down, no PMI, lower rates, and more lenient credit standards. Conventional loans only edge ahead in a few specific situations: very high credit scores with 20%+ down, second homes, or investment properties (not allowed under VA).

Side-by-side comparison

• Down payment: VA = 0%, Conventional = 3–20%
• Mortgage insurance: VA = none, Conventional = PMI required if <20% down
• Credit score: VA = lender's choice (often 580+), Conventional = 620+ minimum
• Funding fee: VA = 1.25–3.3% one-time, Conventional = no funding fee
• Loan limits: VA = no limit if full entitlement, Conventional = ~$766K standard
• Rates: VA typically 0.25–0.5% lower than conventional
• Property type: VA = primary residence only, Conventional = any

Real cost comparison on a $400K home

VA loan, 0% down

Loan amount $400K at 6.0%, plus 2.15% funding fee ($8,600 financed). Monthly P&I: ~$2,450. No PMI. Total cash to close: $0–$5K (closing costs).

Conventional, 5% down

$20K down + closing costs (~$10K). $380K loan at 6.5%. Monthly P&I: ~$2,400 + ~$200 PMI = ~$2,600. PMI drops at 78% LTV.

Conventional, 20% down

$80K down + closing costs. $320K loan at 6.5%. Monthly P&I: ~$2,022. No PMI. Lowest monthly cost — but requires $90K+ cash up front.

When VA wins clearly

• You don't have 20% saved for a down payment
• Your credit score is 580–700 (VA is more flexible)
• You want the lowest possible monthly payment without saving years
• You're buying a single primary residence

When conventional may win

• You have 20%+ down and 780+ credit (PMI-free conventional with great rate)
• You're buying an investment or second home (VA doesn't allow either)
• Loan amount exceeds VA county limits with no remaining entitlement
• You want to avoid the VA funding fee (though it's usually less than years of PMI)

Eligibility

VA loans are available to:

• Active-duty service members (90+ days continuous)
• Veterans with eligible discharge
• National Guard and Reserves (6+ years of service, or 90+ days active duty)
• Surviving spouses of service members who died in service or from service-connected causes

You'll need a Certificate of Eligibility (COE) from the VA — most lenders pull this for you in minutes.

VA funding fee details

The VA funding fee replaces mortgage insurance. It can be financed into the loan.

• First-time use, 0% down: 2.15% of loan
• First-time use, 5%+ down: 1.5%
• First-time use, 10%+ down: 1.25%
• Subsequent use, 0% down: 3.3%
• Veterans with service-connected disabilities: exempt from the funding fee

Use the calculator

Frequently Asked Questions