My Perfect Mortgage
Conventional vs VA Loans: Which is better?
4 minute read
April 4, 2024

If you’re exploring the goal of homeownership, one of the first things you’ll need to consider is the type of loan to apply for. Conventional vs VA loans, DSCR loans vs UDSA loans, FHA loans… the list may seem endless and confusing. 

With this array of options available, it's essential to understand the nuances between them, especially when comparing conventional loans vs VA loans. 

This understanding will not only guide you toward making an informed decision but also help you select a loan that best aligns with your financial circumstances and goals.

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What is meant by a ‘conventional loan’

Conventional loans are the most common type of mortgage—not guaranteed by any government agency. 

They are ideal for borrowers with: 

  • Strong credit
  • A stable income
  • The ability to make a down payment

Down payments for conventional loans

One of the hallmark requirements of a conventional loan is the down payment, which typically ranges from the higher end of 20% to a low of 3% of the home's purchase price. 

The exact down payment amount depends on the borrower's creditworthiness and the loan terms. 

Furthermore, if your down payment is less than 20%, you'll likely need to pay for private mortgage insurance (PMI) which also increases the monthly mortgage payment.

What are VA Loans?

Conversely, VA loans offer a powerful homebuying option for veterans, active military members, and select military spouses. 

The Department of Veterans Affairs backs these loans—designed to make homeownership more accessible to those who have served our country.

No down payment requirement for VA loans 

Topping the list of significant advantages of VA loans is the possibility of a zero-down payment purchase. 

This feature makes it much easier for qualified borrowers to purchase a home without waiting years to save for a down payment.


Additionally, VA loans do not require PMI, regardless of the down payment amount, which can substantially lower monthly payments compared to conventional loans. 

Eligibility for a VA loan is based on service duration and duty status, with specific requirements outlined by the VA, including: 

  • Serving for a minimum number of days in active duty during wartime or peacetime
  • Having a spouse who died in the line of duty / as a result of a service-related disability

Key differences between VA loans vs conventional loans

Side by side, the primary differences between these two loan types become immediately apparent, namely: 

  • Down payment requirements
  • Interest rates
  • Eligibility criteria
  • The need for insurance

Advantages of VA loans

VA loans offer unparalleled benefits for veterans and active-duty service members, a testament to the nation's gratitude for their service. 

  • VA loans do not require a down payment
  • Borrowers are exempt from private mortgage insurance (PMI)
  • Reduced monthly payments due to lack of PMI 
  • More competitive interest rates
  • Limit on closing costs

Advantages of conventional loans

Despite the appealing benefits of VA loans, conventional loans might be more advantageous in certain scenarios. 

Some examples include:

  • Investors looking to purchase rental properties
  • Individuals buying a second home
  • Buyers who have not served or are not married to someone who has served in the military 

For goals like these, conventional loans are often more suitable since VA loans are strictly for primary residences, and for those who have served or are currently serving in the military. 

Moreover, borrowers who can afford a sizeable down payment might prefer a conventional loan to avoid the VA funding fee and capitalize on the equity in their home from the outset.

Considerations when choosing conventional vs VA loans

Choosing the right loan type hinges on several factors, starting with your long-term financial objectives. 

  • VA loans offer immediate benefits
  • Conventional loans might better suit those planning to invest in property or purchase vacation homes 

Property type

Certain properties might not qualify for a VA loan, including: 

  • Vacant land
  • Co-ops
  • Investment properties (at least one of the units must be a primary residence)
  • Vacation homes
  • Properties not accessible by a public or maintained private road
  • Tiny homes
  • Barndominiums
  • Manufactured home

All property types must meet the VA's minimum property requirements—consult with your VA loan lender to see if a property you want might meet the requirements. 

VA service eligibility

Lastly, your service eligibility for a VA loan is paramount—veterans and active service members exclusively access these loans. 

Assess your eligibility before you consider a VA loan. 

How to decide which loan is right for you

  • Start by assessing your financial readiness, including your savings for a down payment and your ability to cover monthly expenses
  • Consider your long-term housing plans and how they align with each loan type's benefits and limitations
  • Weigh the benefits of each type against your investment goals and the type of property you wish to purchase
  • Consult with a mortgage advisor can also provide tailored insights

Conventional vs VA loan: What’s the verdict?

If your decision comes down to a VA loan versus a conventional loan, your choice should be clearer now. 

Each loan type offers distinct advantages tailored to specific financial situations, homeownership goals, and eligibility criteria. 

Those key differences and advantages should equip you to make a choice that aligns with your long-term financial well-being and homeownership aspirations. 

Remember, the decision is personal and varies significantly from one individual to another.

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Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.