VA loans, backed by the VA, offer eligible veterans and service members advantages over conventional loans, notably by eliminating PMI. They typically require no down payment and have more lenient credit standards. Conventional loans, from private lenders, require a down payment and PMI if below 20% equity. While VA loans offer savings, conventional loans may be better for investment properties or when putting 20% down.
Why does “VA loans vs. conventional loans” even matter?
Here’s the deal — the type of home loan you pick will absolutely affect your wallet, your approval odds, and how easy or not the whole homebuying process feels.
I’ve seen people lose out on homes or burn through their savings just because they didn’t understand this up front.
reAlpha’s blog has a lot of info on real estate hacks, but this comparison? It hits different because it could save you thousands — or cost you.
First — what’s the REAL difference?
- VA Loan: Backed by the Department of Veterans Affairs (VA), offered to qualified servicemembers and vets. Typically no down payment, no PMI (private mortgage insurance), more lenient approval standards.
- Conventional Loan: Offered by private lenders. Requires more upfront (usually 3-20% down), decent credit, and PMI if you put less than 20% down.
Quick compare:
Feature | VA Loan | Conventional Loan |
|---|---|---|
| Down Payment | $0 | 3%-20% |
| PMI Required? | No | Yes, if under 20% down |
| Credit Score Needed | ~580+ | ~620–740+ |
| Eligible Borrowers | Military/veterans only | Any qualified buyer |
| Property Type Restrictions | Primary residence only | Primary, second home, rentals |
Who should look at VA loans?
If you’re eligible — don’t sleep on it. VA loans vs. conventional loans becomes an easier choice when you realize the power of VA benefits. I had a buddy in the Marines who got into his first home with nothing down, and his monthly payment came out lower than expected because there was no PMI. That’s game-changing when you’re tight on cash upfront.
Here’s who usually benefits most from a VA loan:
- You’ve got military service under your belt (or a surviving spouse certificate)
- Your credit is lower than average, or you’re building it
- You want to own a home without putting down 5 figures
- You’re buying your primary residence
Now, VA loans do come with a funding fee — kind of a tradeoff for that zero-down access. But if you’re exempt (from service-connected disabilities), it’s waived.
Where conventional loans smoke VA loans
It’s not all sunshine and flag-waving with VA loans. There are situations where a conventional mortgage stomps it out. Here’s where:
- You’re putting 20% or more down — skipping PMI completely like in a VA loan
- You’ve got strong credit and income to qualify for a better rate
- You’re buying an investment property or second home
- You’re planning to win the house in a bidding war (Sellers sometimes avoid VA loans because of appraisal hoops — not always fair, but it happens.)
VA loans vs. conventional loans gets real simple when you ask: “Who’s this house for?”
- If it’s a fixer-upper or future Airbnb? You’ll need a conventional loan.
- If it’s your home, and eligibility is not a question? VA might be your golden ticket.
Real Talk: How much money could you save?
Let’s do some fast math using a $300,000 home example. Assume 30-year fixed terms.
Conventional loan (5% down, 6.5% interest rate)
- Down Payment = $15,000
- PMI = ~$150/month (until hitting 20% equity)
- Monthly Payment Estimate = $2,025
VA loan (no down, 6.25% rate, 2.3% funding fee)
- Funding Fee = ~$6,900 (rolled into loan)
- Monthly Payment Estimate = $1,940
- No PMI
That’s real savings every single month. And no cash needed to close (aside from closing costs).
But if you’ve got great credit, that conventional loan could shine with better rates — especially if you’re not folding the VA funding fee into that mortgage total.
What lenders don’t always tell you
This part right here is important:
- Lenders make money whether it’s VA or conventional
- But not all lenders are great at VA loans — some just check the box, others specialize in them
So if you’re serious about comparing VA loans vs. conventional loans for your real life, make sure your loan officer isn’t just pushing one product.
And go into it knowing what you’re using the property for — reAlpha’s guide to investment properties can help you sort out what works if you’re going down that route.
FAQs about VA Loans vs. Conventional Loans
Do VA loans have better interest rates?
Most of the time, yes. VA loans are backed by the government, so lenders take less risk. That usually means lower rates than conventional. But it STILL depends on your credit, income, and the lender’s pricing.
Can I use a VA loan more than once?
Yep. As long as you’ve restored your entitlement (by selling or officially paying off a prior VA loan), you can re-use that benefit.
Do sellers prefer conventional loans over VA loans?
Often, yes. VA loans come with appraisals and repairs that sellers view as “more work.” Doesn’t mean you can’t win—just means your offer might need to be stronger.
Is it true VA loans take longer to close?
Not really — that used to be the case. These days, VA loans can close just as fast. Most of the delay comes from the lender being slow, not the loan type.
Can I buy land or a vacation home with a VA loan?
VA loans are only for primary residences. You’ll need a conventional loan for raw land or that beach house in Florida.
Is the VA loan 100% free?
No — no down payment ≠ no cost. You’ll still pay the funding fee (unless exempt) and the usual closing costs. But compared to a conventional loan, you might pay less up front.