VA vs Conventional Loan: Which is Better for Veterans?
Compare VA and Conventional loans to maximize your military home buying benefits. Learn how 0% down, no PMI, and veteran-exclusive perks can save you thousands.
VA vs Conventional: Quick Comparison
| Feature | VA Loan | Conventional Loan |
|---|---|---|
| Down Payment | 0% (100% financing) | 3-20% |
| Mortgage Insurance | None (No PMI) | 0.3-1.5% annual (if <20% down) |
| VA Funding Fee | 2.15% (first-time) 3.3% (subsequent) Waived for disabled veterans | N/A |
| Minimum Credit Score | 580-620 (lender varies) | 620 (700+ for best rates) |
| Interest Rate | Typically 0.25-0.5% lower | Market rate |
| Loan Limits (2024) | No limit (full entitlement) | $766,550 (Bergen County) |
| Seller Concessions | Up to 4% | 3-9% |
| Eligibility | Veterans, active duty, reserves | Anyone |
| Best For | Veterans with minimal savings First-time homebuyers Low down payment | Non-veterans 10%+ down payment Investment properties |
Exclusive VA Loan Benefits (Not Available with Conventional)
0% Down Payment
Finance 100% of the home purchase with no money down. This saves you $50,000-$150,000 in upfront costs compared to Conventional loans requiring 10-20% down.
No PMI/Mortgage Insurance
VA loans never require private mortgage insurance, even with 0% down. This saves $150-$400/month compared to Conventional loans with less than 20% down.
Lower Interest Rates
VA loans typically offer 0.25-0.5% lower rates than Conventional loans because they're guaranteed by the VA. This saves $50,000+ over a 30-year mortgage.
Limited Closing Costs
VA restricts what lenders can charge veterans for closing costs. Seller can pay up to 4% of closing costs, reducing your out-of-pocket expenses.
No Loan Limits
Veterans with full entitlement have no maximum loan amount (subject to lender approval). Buy luxury homes in expensive markets without jumbo loan penalties.
Reusable Benefit
Use your VA loan benefit multiple times throughout your life. Sell your home, pay off the loan, and your full entitlement is restored for future purchases.
Real Cost Comparison: VA vs Conventional
$600,000 Home Purchase in Bergen County
6.25% interest rate (VA) vs 6.5% (Conventional), 30-year fixed
| Item | VA Loan (0% down) | Conventional (10% down) |
|---|---|---|
| Down Payment | $0 | $60,000 |
| Loan Amount | $600,000 | $540,000 |
| VA Funding Fee / PMI | $12,900 (2.15%, financed) | $0 upfront |
| Interest Rate | 6.25% | 6.50% |
| Monthly P&I Payment | $3,772 | $3,414 |
| Monthly PMI | $0 | $270 |
| Total Monthly Payment | $3,772 | $3,684 |
| Cash Needed to Close | ~$5,000 (closing costs only) | ~$68,000 (down + closing) |
| Total PMI Costs (8 years) | $0 | $25,920 |
| Total Interest Paid (30 years) | $757,972 | $689,144 |
VA Loan Saves You:
- $63,000 in upfront cash (no down payment required)
- $25,920 in PMI costs (no mortgage insurance)
- Lower monthly payment after PMI is removed from Conventional loan
- Total savings: $88,920+ over the life of the loan
Should You Use Your VA Loan Benefit?
Use a VA Loan if:
- ✓You qualify for VA benefits (veteran, active duty, reserves, surviving spouse)
- ✓You have limited savings for a down payment (VA requires $0)
- ✓You want to avoid PMI and save $200-$400/month
- ✓You're buying a primary residence (not investment property)
- ✓You want lower interest rates and total loan costs
- ✓You're disabled and exempt from the VA funding fee
Consider Conventional if:
- ?You don't qualify for VA benefits (not a veteran/active duty)
- ?You're buying an investment property or second home
- ?You have 20%+ down payment (no PMI on either loan type)
- ?The property doesn't meet VA minimum property requirements
- ?You want to preserve your VA entitlement for a future purchase
Bottom Line for Veterans:
If you qualify for a VA loan, use it. The 0% down, no PMI, and lower rates make VA loans the best option for nearly all eligible veterans buying a primary residence. Even if you have cash for a down payment, you'll save more by keeping that money invested or in emergency savings.
Frequently Asked Questions
What are the main benefits of a VA loan vs Conventional?
VA loans offer 0% down payment, no PMI/mortgage insurance, lower interest rates, more lenient credit requirements, and limited closing costs. These benefits can save veterans tens of thousands of dollars compared to Conventional loans.
Do I need a down payment for a VA loan?
No. VA loans offer 100% financing with $0 down payment for eligible veterans, active duty service members, and surviving spouses. This is a significant advantage over Conventional loans which typically require 3-20% down.
What is the VA funding fee and is it required?
The VA funding fee is 2.15% for first-time use (3.3% for subsequent use) and can be financed into the loan. Veterans with service-connected disabilities are exempt. While Conventional loans have no funding fee, they require PMI which costs much more over time.
Can I use a VA loan more than once?
Yes! Your VA loan benefit is reusable. Once you sell your home and pay off the VA loan, your full entitlement is restored for future purchases. You can even use your VA loan benefit multiple times simultaneously if you have remaining entitlement.
Who qualifies for a VA loan?
Active duty service members (90+ days), veterans with qualifying service periods, National Guard and Reserve members (90+ days active duty), and surviving spouses of veterans who died in service or from service-connected disabilities qualify for VA loans. You'll need a Certificate of Eligibility (COE) from the VA.
Ready to Use Your VA Home Loan Benefit?
Get pre-approved for a VA loan and discover how much you can save with 0% down and no PMI. Speak with a VA loan specialist who understands military benefits.