VA Loan vs Conventional

For eligible veterans, active-duty service members and certain surviving spouses, the VA loan is usually the best deal in mortgages — zero down payment, no mortgage insurance, and rates that routinely beat conventional. But it is not automatically the right choice for every veteran. Here is a clear breakdown of how the VA loan stacks up against a conventional loan, and the one fee you should not overlook.

The VA advantage

The VA loan carries three benefits no conventional loan matches:

• No down payment. Buy a home with $0 down, while conventional loans typically require at least 3% and FHA requires 3.5%.
• No mortgage insurance. Conventional loans charge PMI below 20% down, and FHA charges lifetime MIP. The VA loan charges neither — a savings of $100 to $400 a month.
• Competitive rates. Because the VA guarantees a portion of the loan, lenders price VA loans at or below conventional rates, even with no down payment.

Those three together mean a veteran buying a $400,000 home with $0 down can often get a lower monthly payment than a civilian putting down 20% — because the veteran skips both PMI and the higher-rate premium that usually comes with low down payments.

The funding fee

The VA loan is not entirely free. Most borrowers pay a one-time funding fee that keeps the program running without taxpayer money:

Down payment	First use	Subsequent use
Less than 5%	2.15%	3.30%
5% to 10%	1.50%	1.50%
10% or more	1.25%	1.25%

On a $400,000 first-use loan with no down payment, that is $8,600. The fee is usually rolled into the loan balance, so you pay nothing out of pocket — but you do pay interest on it for the life of the loan. Veterans receiving VA disability compensation are exempt from the fee entirely.

When conventional wins

The VA loan is not always the cheapest path. Consider conventional when:

• You have a large down payment. If you can put 20% down, a conventional loan avoids the funding fee and PMI together, and the strong equity can earn a slightly better rate.
• Excellent credit plus low loan-to-value. In rare cases a 760+ score with 20%+ down prices conventional slightly under VA.
• You are buying a property the VA won't finance. The VA is limited to primary residences and requires the home to pass its own appraisal standards.

For most veterans putting down less than 20%, the VA loan wins — often by a wide margin — once you compare the full monthly payment rather than the headline rate.

VA eligibility at a glance

You are generally eligible with 90 consecutive days of active service during wartime, 181 days during peacetime, or six years in the reserves or National Guard. Surviving spouses of service members who died in the line of duty or from a service-connected disability may also qualify. Your lender verifies eligibility through a Certificate of Eligibility (COE), which you can obtain online through the VA or have your lender pull for you.

The honest comparison

The right way to decide is to compare the actual monthly payments side by side. For a $400,000 home, here is roughly how the two paths shake out:

	VA (0% down)	Conventional (20% down)
Down payment	$0	$80,000
Loan amount	$400,000	$320,000
Monthly P&I (6.5%)	$2,528	$2,023
Mortgage insurance	$0	$0

The conventional borrower pays $505 less a month — but only after handing over $80,000 up front. The veteran gets into the same home immediately, keeps the cash, and pays no insurance premium. For most first-time veteran buyers, that trade-off favors the VA loan decisively.

Frequently asked questions

Does the VA loan have a minimum credit score?

The VA sets no official minimum, but most lenders require 620 to 640. Shop around — some lenders go lower for strong VA borrowers.

Can I use a VA loan more than once?

Yes. The VA entitlement is reusable, and the funding fee rises slightly on subsequent use unless you make a down payment.

Is the VA funding fee tax deductible?

Generally no as a closing-cost deduction, though rules can vary. Confirm with a tax professional.

Can I buy a second home or investment property with a VA loan?

No. VA loans are for primary residences only. You must intend to live in the home.

Compare VA and conventional payments side by side on the HomeMath mortgage calculator — toggle the down payment to zero and remove PMI to model the VA scenario.