| Feature | VA Loan | Conventional Loan |
|---|---|---|
| Down payment | 0% (100% financing) | 3% minimum (first-time buyers) / 5% standard |
| Monthly mortgage insurance | None | PMI required below 20% down |
| Upfront fee | 1.25–3.3% funding fee (financed, exempt for disabled) | None |
| Credit score minimum | No VA-set minimum (lender overlays 580–620 typical) | 620 typical (740+ best) |
| DTI cap | No hard cap (residual income test) | 45–50% |
| Loan limits | No limit for fully-entitled veterans | Conforming or jumbo limits apply |
| Eligibility | Eligible veterans, active duty, surviving spouses | Any qualified borrower |
| Property types | Primary residence only | Primary, second home, investment |
The complete picture
For eligible veterans, the VA loan is almost always the strongest mortgage product available. Zero down payment, no monthly mortgage insurance, no maximum loan limit for full-entitlement borrowers, and competitive interest rates — there's no other loan with the same combination of benefits.
The main tradeoff is the funding fee (1.25%–3.3% of the loan amount), paid once at closing and usually financed into the loan. The fee is waived for veterans with 10%+ service-connected disability, Purple Heart recipients, and certain surviving spouses. Even when paid, the fee is typically recouped within 1–2 years of monthly savings versus an equivalent conventional loan with PMI.
Conventional may still win for veterans buying investment properties (VA is primary-residence only), veterans with no remaining entitlement after past use, or veterans with substantial 20%+ down payments and excellent credit where the funding fee outweighs PMI savings. Run both scenarios — a good VA-experienced loan officer will model the math for you in 10 minutes.
Frequently asked questions
Can I have more than one VA loan at the same time?+
Yes, in certain circumstances. If you have remaining entitlement after a previous VA loan that wasn't fully paid off (typically because you PCS'd and rented the home rather than selling), you can use second-tier entitlement to get another VA loan. Your loan officer will calculate available entitlement.
Is the VA funding fee tax-deductible?+
Yes. The VA funding fee is treated as deductible mortgage insurance for tax purposes, similar to PMI and FHA MIP. It's typically claimed as an itemized deduction in the year paid (with phase-outs at higher incomes). Consult your tax advisor for your specific situation.
How does conventional PMI compare to VA funding fee over time?+
On a $400K loan, conventional PMI at 5% down might be $200/month for 7-10 years until reaching 80% LTV — roughly $20,000 total. VA's funding fee on the same scenario is $9,000 at first use, paid once. VA almost always wins on total cost for eligible borrowers.
Can I use a VA loan for a fixer-upper?+
Yes. The VA Renovation Loan combines purchase price and renovation costs in a single VA loan. Loan amount is based on the after-renovation appraised value. This is less commonly offered than FHA 203(k) but available through specialized VA-renovation lenders.