VA Loan vs Conventional Loan: A Side-by-Side Comparison
A side-by-side comparison of VA loans vs conventional loans — down payment, PMI, rates, fees, appraisals, and the breakeven math.
VA loans almost always beat conventional loans for eligible veterans: no down payment, no PMI, lower interest rates, and limited closing costs. Conventional loans only edge out the VA loan for buyers putting 20%+ down with excellent credit who want to avoid the funding fee.
Most veterans are better off with a VA loan than a conventional loan — but the conventional wisdom that 'VA is always better' has exceptions. This article breaks down the comparison line by line so you can decide based on math, not myth.
Down Payment
VA: $0 down for the vast majority of buyers, with no maximum loan amount if you have full entitlement.
Conventional: 3% minimum (HomeReady/Home Possible), but practical minimum is 5–10%, with 20% needed to avoid PMI.
Mortgage Insurance
VA: No PMI, ever. The funding fee is a one-time cost, not a recurring monthly charge.
Conventional: PMI runs $30–$70 per month per $100,000 borrowed until you hit 20% equity.
Interest Rates
VA rates run roughly 0.25–0.5% below conventional rates. On a $300,000 loan, that's around $40–$80 per month in interest savings.
Up-Front Fees
- VA funding fee: 1.25–3.3% of the loan amount, waived for disability-rated veterans.
- Conventional origination + closing costs: 2–4% of the loan amount.
- VA closing cost limits help keep total cash to close lower.
Not sure your credit qualifies for a VA loan yet?
Check VA Loan Credit RequirementsAppraisals
VA appraisals check both value and Minimum Property Requirements (MPRs). They take a few days longer and can flag safety or livability issues a conventional appraisal would ignore. That can be a feature, not a bug — but it occasionally kills deals on fixer-uppers.
The Breakeven Math
On a $350,000 loan, a 5%-down conventional buyer with a 740 credit score might pay 7.0% with PMI of $150/month. A VA buyer pays 6.625% with no PMI but a 2.15% funding fee ($7,525) financed into the loan.
The VA buyer's first 24 months of payments come out roughly $3,600 cheaper, and the funding fee is recouped through PMI savings inside 4 years.
When Conventional Wins
- 20%+ down payment, excellent credit, and a desire to avoid the funding fee entirely.
- Investment properties (VA loans require primary residency).
- Sellers who refuse VA financing in extremely competitive markets (becoming rarer thanks to seller-protection rules).
Credit Flexibility Differences
Conventional loans typically require higher minimum credit scores than VA-approved lenders, since there's no government guaranty absorbing part of the lender's risk. A veteran rebuilding credit after a rough financial stretch often qualifies for a VA loan well before they'd clear a conventional lender's threshold, which is a meaningful advantage beyond the down payment and PMI differences alone.
Frequently asked questions
Conclusion
For 9 out of 10 eligible veterans, the VA loan saves real money over a conventional mortgage. Run your specific numbers, but don't assume conventional is 'safer' or 'more professional' — those are myths that cost veterans thousands.
Not sure your credit qualifies for a VA loan yet?
Check VA Loan Credit Requirements