VA vs Conventional Loans
See how VA loans compare to conventional mortgages on down payment, mortgage insurance, interest rates, and eligibility requirements.
VA Loan
Advantages
- Zero down payment required for eligible veterans, active-duty service members, and surviving spouses
- No private mortgage insurance (PMI) at any loan-to-value ratio
- Typically the lowest interest rates of any mortgage program
- No prepayment penalties and limited closing costs by VA regulation
Drawbacks
- VA funding fee of 1.25 to 3.3 percent (waived for disabled veterans)
- Only available to eligible veterans, active-duty members, National Guard, Reserves, and surviving spouses
- Property must be a primary residence
Best For
Eligible veterans and active-duty service members who want to maximize purchasing power with zero down and no mortgage insurance.
Conventional Loan
Advantages
- Available to anyone who meets credit and income requirements
- Can be used for primary residences, second homes, and investment properties
- PMI drops off at 20 percent equity, reducing long-term costs
- Wider range of property types and fewer restrictions on use
Drawbacks
- Requires a minimum down payment of 3 to 5 percent
- PMI required until 20 percent equity is reached
- Interest rates are generally higher than VA loan rates for the same borrower profile
Best For
Non-veteran borrowers or veterans purchasing a second home or investment property that does not qualify for VA financing.
Key Differences
| Category | VA Loan | Conventional Loan |
|---|---|---|
| Down Payment | 0% for eligible borrowers | 3-5% minimum, 20% to avoid PMI |
| Mortgage Insurance | None (VA funding fee instead) | PMI required until 20% equity |
| Interest Rates | Typically 0.25-0.5% lower | Market rate based on credit and LTV |
| Eligibility | Veterans, active-duty, Guard/Reserves, surviving spouses | Any qualified borrower |
| Property Use | Primary residence only | Primary, second home, or investment |
The Bottom Line
If you have VA eligibility, the VA loan is almost always the best option for purchasing a primary residence. Zero down payment and no mortgage insurance translate to significant savings over the life of the loan. Conventional loans remain the better fit for second homes, investment properties, or borrowers who are not eligible for VA benefits.
Run the Numbers
Use the mortgage calculator to see how each option affects your monthly payment and total cost.
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