Financing
VA vs Conventional.
If you qualify for VA, see what the funding fee, no-PMI structure, and zero down really buy you over the hold period that matters.
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VA vs Conventional
If you qualify for VA, the math usually wins. Here's why.
VA loans have three structural advantages: zero down payment, no monthly mortgage insurance ever, and competitive interest rates. The cost is the funding fee — a one-time charge of 1.25% to 3.3% of the loan, often financed in. For most eligible buyers planning long holds, the VA path saves substantial money.
Eligibility, briefly
- Active duty: 90 continuous days during wartime, 181 during peacetime.
- Veterans: 24 months of continuous active duty (with some exceptions for medical discharge).
- Reserve / National Guard: 6 years of service.
- Surviving spouses of service members who died in the line of duty or from a service-connected disability.
The VA issues a Certificate of Eligibility (COE) documenting your qualification. Most lenders pull it electronically during pre-approval.
The funding fee
The funding fee is the cost of using the VA benefit. It's paid once at closing (or financed into the loan), and goes to the VA to support the loan-guarantee program — not to the lender or to private mortgage insurance. Tier:
- First-time use, <5% down: 2.15%. The most common scenario.
- First-time use, 5–9.99% down: 1.50%. A modest down lowers the fee meaningfully.
- First-time use, 10%+ down: 1.25%. The lowest fee for first-time users.
- Subsequent use, <5% down: 3.30%. Used the benefit before; substantially higher fee.
- Exempt: Purple Heart recipients, service-connected disability ratings, and surviving spouses pay no funding fee.
Why VA is structurally efficient
- No PMI ever. The funding fee replaces PMI. On a Conventional loan with 0% down, you'd pay PMI for 11+ years. VA: zero PMI, lifetime.
- Lower rates. VA rates often run 25–50 basis points below Conventional because the federal guarantee reduces lender risk.
- Cash preservation. Zero down means your savings stay liquid for reserves, repairs, and life.
- No private mortgage insurance hassle. No removal request, no LTV tracking, no annual reviews.
When Conventional might still win
- Large down payment available (20%+). Conventional with 20% down has no PMI either; the comparison comes down to rate spread vs the VA funding fee. Sometimes Conventional wins by a small margin.
- Subsequent VA use. The 3.3% funding fee on subsequent use is large enough that Conventional often wins for 5%-down comparisons.
- Investment property or second home. VA isn't available for either. Conventional is the only path.
- Jumbo territory above the VA limit. VA jumbo loans exist but pricing is less competitive than Conventional jumbos in many markets.
If you qualify, run this calculator first. The VA loan benefit is one of the most valuable financial benefits available to service members and veterans. The funding fee is real but the long-run savings are usually substantial.
FAQ
Common questions about va vs conventional.
Is the VA funding fee tax-deductible?
Federally, the VA funding fee is not directly deductible. However, if it's financed into the loan (the default option), it gets paid through interest over the loan's life, and that interest is mortgage interest — deductible to the extent of the mortgage interest deduction in any year. Most homeowners take the standard deduction post-2017, so the practical benefit is small.
Can I use the VA loan more than once?
Yes — the VA loan benefit can be used multiple times. After paying off a previous VA loan or selling the home, you can restore your full VA entitlement. The funding fee tier is higher on subsequent use (3.3% vs 2.15% with the same down).
What's the VA loan limit?
For most counties, there's no formal VA loan limit if you have full entitlement remaining. In high-cost counties, conforming loan limits apply, but VA jumbos are available with lender-specific underwriting.
Do VA loans require a higher credit score?
VA itself doesn't set a minimum credit score — but most lenders require 580–620 minimum. Strong credit (700+) gets the best rates. The VA's underwriting flexibility on debt-to-income and residual income is generally more forgiving than Conventional, even with similar credit.
Can I assume a VA loan?
VA loans are assumable — a buyer can take over the loan if they qualify with the lender. This is increasingly valuable in high-rate environments because the assumable rate may be much lower than current market. Note that the original veteran's entitlement may be tied up until the loan is paid off.
What's the difference between VA's funding fee and FHA's MIP?
VA's funding fee is one-time, with no monthly MIP afterward. FHA charges both an upfront 1.75% MIP and monthly MIP for the life of the loan if down is under 10%. For a 30-year hold, FHA's lifetime MIP often costs 3–5x the VA funding fee. VA is structurally cheaper for eligible borrowers.
Keep going
Related calculators.
Use the benefit
VA loans are one of the strongest housing-finance benefits available.
If you're eligible and considering a Conventional loan instead, run this comparison before signing. The hold-period numbers are usually decisive.