Buying a home is one of the biggest financial decisions most people will ever make, but choosing the right type of mortgage is just as important as choosing the home itself.
For eligible service members, veterans, and surviving spouses, the VA loan is a powerful tool that can make homeownership more affordable. However, it's not always the best fit for every situation. Depending on your finances, long-term plans, and home-buying goals, a conventional mortgage might also be worth considering.
In this guide, we’ll break down the key differences between VA loans and conventional loans, compare costs and requirements, and help you determine which type of mortgage better aligns with your needs and financial situation.
See What You Qualify For With a VA Loan
Check VA Eligibility
VA Loan vs. Conventional Loan: Side-by-Side Comparison
| VA loan | Conventional loan | |
|---|---|---|
| Down payment | 0% required | Typically 3%–20% required |
| PMI | No PMI | PMI required if putting less than 20% down |
| Credit score | Usually 580–620 minimum | Usually 620–680+ minimum |
| Interest rates | Typically lower | Typically higher |
| Closing costs | Limited by VA rules | Varies widely; no special protections |
| Property requirements | Must meet VA standards | More flexible requirements |
| Funding fee | Yes (unless exempt) | None |
| Can be used for investment properties | No | Yes |
| Best for | Veterans and military buyers | Buyers with good credit and a large down payment |
What is a VA Loan?
A VA home loan is a mortgage backed by the U.S. Department of Veterans Affairs (VA). While the VA doesn’t actually lend the money, it guarantees a portion of the loan, which reduces the lender’s risk and allows for more flexible terms.
The main benefits of a VA loan include:
- No down payment required
- No private mortgage insurance (PMI)
- Competitive interest rates
- More flexible credit requirements
- Limits on what closing costs borrowers pay
Many active duty service members, veterans, National Guard/Reservists, and surviving spouses qualify for a VA loan. However, you must get a Certificate of Eligibility (COE) to use a VA mortgage.
Eligible borrowers can use the VA loan benefit multiple times during their life, and can even have more than one VA loan at once in certain circumstances.
What is a Conventional Loan?
Conventional loans are mortgages that aren’t backed by the government. These loans are funded by private lenders and typically follow guidelines set by Fannie Mae/Freddie Mac.
There are two types of conventional loans—conforming and non-conforming. Conforming loans meet Fannie Mae/Freddie Mac standards for loan limits and qualifications. Non-conforming loans, like jumbo loans, don’t meet these guidelines and usually have stricter requirements.
The main benefits of conventional mortgages are:
- Widely available from most lenders
- Flexible property requirements
- Loans can be used for investment properties and second homes
Key Differences Between VA Loans and Conventional Loans
VA loans and conventional loans differ in many ways. Learn how these loans work in terms of down payment, mortgage insurance, credit score requirements, and more.
Down Payment Requirements
The VA loan is one of the only mortgage products that offers true zero-down financing. You can finance 100% of the home’s price with no minimum down payment.
Conventional mortgages typically require a down payment of between 3% and 20%.
Mortgage Insurance
VA borrowers never pay PMI, regardless of down payment amount.
If you get a conventional loan and put less than 20% down, you’ll have to pay mortgage insurance. PMI rates vary based on your credit score and down payment, and borrowers with lower credit scores can pay significantly more.
Credit Score Requirements
While the VA doesn’t set a specific minimum credit score for VA loans, most lenders require a minimum score of 580 to 620 to qualify.
Conventional mortgages generally require a higher score of at least 620, but a score of 700 is typically preferred. With either loan, borrowers with excellent credit get the best rates and loan terms.
Closing Costs and Fees
VA loans have standard closing costs, but the VA limits certain fees, like processing and underwriting fees. Plus, the seller can pay up to 4% of the closing costs.
Military homebuyers who use a VA mortgage usually pay a one-time VA funding fee, which supports the VA home loan program. For a VA purchase loan, this fee is between 1.25% and 3.3% of the total loan amount, depending on your service history and down payment. Some borrowers, including disabled veterans, are exempt from paying the fee.
Conventional mortgages also have closing costs, which often include lender fees, PMI setup fees, appraisal fees, title fees, and escrow fees. Seller contributions are allowed, but they’re usually lower than the 4% threshold for VA loans.
See What You Qualify For With a VA Loan
Check VA Eligibility
Property Requirements and Appraisals
If you get a VA loan, you’ll most likely need a home appraisal to confirm the home’s value and ensure it meets the VA’s Minimum Property Requirements (MPRs). Because of these requirements, it can be harder to use a VA loan to buy a fixer-upper or a unique, non-conforming property.
Conventional mortgage home appraisals are much more flexible. Appraisers focus mainly on the value of the property, not the condition, so it can be a better option if you want to purchase a distressed property or a foreclosure.
Loan Limits
If you have full entitlement, there is no VA loan limit. You can borrow as much as your lender approves based on your financial situation. If you have reduced entitlement, county loan limits can apply.
With a conventional loan, the national baseline conforming loan limit for 2026 is $832,750 for a single-family home, but the exact amount varies by county. If you want to borrow more than this amount, it will require a non-conventional jumbo loan, which comes with stricter requirements.
Property Types
One of the main considerations you should have when choosing between a VA loan vs. a conventional loan is the type of property you’re purchasing. The table below shows what kinds of homes you can buy with these loans.
| Property type | VA loan | Conventional loan |
|---|---|---|
| Primary residence | Yes | Yes |
| Second home | No | Yes |
| Investment property | No | Yes |
| Multi-unit (up to 4 units) | Yes (must live in one unit) | Yes |
| Condo | Yes (only if VA-approved) | Yes |
Long-Term Costs: Which Loan is Cheaper Over Time?
When comparing total cost over the life of the loan, VA loans are usually cheaper. You won’t pay a down payment or PMI, and you could get a lower interest rate and lower closing costs.
However, it’s possible that a conventional loan could be more affordable if you plan to put 20% down (which eliminates PMI) and have excellent credit. It’s worth getting quotes from several lenders to see what rate you can qualify for.
When to Consider a VA Loan vs. a Conventional Loan
For most eligible borrowers in the military, a VA loan is the best financing option available. As long as you meet the requirements, this type of loan is a great choice if you:
- Want to avoid a down payment
- Have limited savings
- Have a lower credit score
- Are exempt from the funding fee
- Are buying a move-in-ready home
Despite the benefits of VA loans, they aren’t always the right option. A conventional mortgage could be better if:
- The home needs significant repairs and won’t meet VA appraisal standards
- You're buying a second home or investment property
- You plan to put 20% or more down
- Your credit is excellent (740+)
- The seller prefers non-VA buyers due to VA appraisal requirements
In competitive housing markets, having a conventional mortgage pre-approval can sometimes help strengthen your offer. But if you work with a realtor who understands VA loans, they can effectively advocate for you during negotiations with the seller.
Frequently asked questions
Is a VA loan better than a conventional loan?
For most eligible service members, veterans, and surviving spouses, a VA loan is often the better option. VA loans offer benefits that conventional loans do not, including no down payment requirement, no private mortgage insurance, and typically lower interest rates. These features can significantly reduce upfront costs and monthly payments.
That said, a VA loan is not always the best choice in every situation. Buyers purchasing investment properties, second homes, or homes that need major repairs may find a conventional loan more suitable.
What are the disadvantages of a VA loan?
While VA loans offer strong benefits, there are some limitations to consider. VA loans require the home to meet Minimum Property Requirements, which can make it harder to buy fixer-uppers or distressed properties. VA loans also cannot be used for investment properties or second homes, and most borrowers must pay a one-time VA funding fee unless they are exempt.
In competitive housing markets, some sellers may also prefer conventional offers due to misconceptions about VA appraisals or timelines. Understanding these tradeoffs can help buyers choose the right loan type for their situation.
What is the biggest advantage of a VA loan?
The biggest advantage of a VA loan is the ability to buy a home with no down payment and no private mortgage insurance. These two features alone can save borrowers tens of thousands of dollars over the life of a loan.
In addition, VA loans typically offer lower interest rates, more flexible credit guidelines, and limits on certain closing costs. Together, these benefits make homeownership more accessible and affordable for military families.
Do you have to put 20% down on a conventional loan?
No, a 20% down payment is not required for a conventional loan. Many conventional mortgages allow down payments as low as 3%. However, if you put less than 20% down, you will typically be required to pay private mortgage insurance.
Putting 20% down eliminates PMI and can result in better loan terms, which is why it is often recommended. Buyers who do not have a large down payment may find a VA loan more cost-effective in comparison.
When does a conventional loan make more sense than a VA loan?
A conventional loan may be the better choice if you are buying a second home or investment property, since VA loans are limited to primary residences. Conventional loans can also be more flexible for homes that do not meet VA property standards, such as fixer-uppers or unique properties.
Additionally, buyers with excellent credit who can put 20% or more down may find that a conventional loan offers competitive rates without mortgage insurance. In fast-moving markets, a conventional loan can sometimes make an offer more attractive to sellers.
Are VA loan appraisals stricter than conventional appraisals?
Yes, VA loan appraisals are generally stricter than conventional appraisals. In addition to determining market value, VA appraisals ensure the property meets Minimum Property Requirements related to safety, livability, and structural integrity.
Conventional appraisals focus primarily on value rather than condition, which can make them more flexible for homes needing repairs.
Which loan is cheaper over time, VA or conventional?
In many cases, a VA loan is cheaper over time due to the lack of PMI, lower interest rates, and reduced upfront costs. Even when accounting for the VA funding fee, total lifetime costs are often lower for VA borrowers.
However, a conventional loan may be cheaper if you put 20% down, avoid PMI entirely, and qualify for a very low interest rate.
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