VA Loan vs. Conventional Loan: Which Is Better in 2026?
A side-by-side comparison for eligible veterans and service members deciding between the two.
Quick comparison
| Factor | VA Loan | Conventional Loan |
|---|---|---|
| Down payment | 0% minimum | 3-20%+ typical |
| Mortgage insurance | Never — VA funding fee instead | PMI required under 20% down |
| Interest rates | Often slightly lower | Market rate, credit-dependent |
| Credit score | No VA minimum (lenders: ~580-620) | 620+ (740+ for best terms) |
| Occupancy | Primary residence only | Primary, second home, or investment |
| Eligibility | Veterans, active duty, some spouses | Anyone who qualifies financially |
| Upfront fee | VA funding fee (1.25%-3.3%, often financed) | Varies by lender, no funding fee |
Down payment
The biggest difference is upfront cash. VA loans allow 0% down for eligible borrowers, while conventional loans typically require at least 3-5% down for the best programs, and 20% to avoid mortgage insurance entirely. For a $350,000 home, that's the difference between $0 and $17,500-$70,000 out of pocket.
Mortgage insurance: PMI vs. the VA funding fee
Conventional loans charge private mortgage insurance (PMI) every month until you reach 20% equity — often $100-$300+/month depending on your credit and down payment. VA loans never charge PMI, no matter your down payment. Instead, they charge a one-time VA funding fee (1.25%-3.3% of the loan amount, or 0% if you're exempt), which can be paid upfront or rolled into the loan.
Interest rates
Because the VA guarantees a portion of the loan to the lender, VA loans often carry slightly lower interest rates than conventional loans for a similar credit profile. The actual rate you're offered still depends heavily on your credit score, debt-to-income ratio, and the lender you choose — always compare real quotes, not just averages.
Credit score requirements
The VA itself doesn't set a minimum credit score, leaving that up to individual lenders — most look for at least 580-620. Conventional loans generally require 620+, and you'll need a score of 740 or higher to get the best rates and lowest PMI costs.
When a conventional loan might make more sense
VA loans are hard to beat for a primary residence, but a conventional loan can be the better choice if: you're buying a second home or a pure investment property (VA loans require the home to be your primary residence), you want to preserve your VA loan entitlement for a future purchase, or you're putting 20%+ down anyway and want to avoid the VA funding fee entirely.
Example: a $350,000 home three ways
All three loans use the same 6.5% rate over 30 years, to isolate the effect of the down payment, the funding fee and mortgage insurance. In real life the rates would differ by lender and credit score. Private mortgage insurance varies widely, so the 0.5% a year used here is only an assumption. Taxes and insurance are left out because they would be the same.
| VA, 0% down | Conventional, 5% down | Conventional, 20% down | |
|---|---|---|---|
| Down payment | $0 | $17,500 | $70,000 |
| Upfront VA funding fee (financed) | $7,525 | $0 | $0 |
| Loan amount | $357,525 | $332,500 | $280,000 |
| Monthly principal and interest | $2,260 | $2,102 | $1,770 |
| Monthly mortgage insurance | $0 | $139 (assumed 0.5% a year) | $0 |
| Monthly total | $2,260 | $2,240 | $1,770 |
The VA loan needs no cash for a down payment and has a monthly cost close to the conventional loan with 5% down, because there is no mortgage insurance. The conventional loan with 20% down has the lowest payment, but it takes $70,000 in cash. For most eligible buyers with less than 20% to put down, the VA loan comes out ahead. Compare your own numbers with the VA loan payment calculator and the VA vs FHA calculator, and read our down payment guide for when putting money down on a VA loan pays off.
Frequently asked questions
Is a VA loan always better than a conventional loan for veterans?
Usually, for a primary residence, yes — 0% down and no PMI are hard to beat. But a conventional loan can make more sense if you're buying a second home or investment property (VA loans require the home to be your primary residence), or if you want to preserve your VA entitlement for a future purchase.
Can I use a VA loan to buy a rental property?
No, not as a pure investment property. VA loans require you to certify the home as your primary residence, though you can buy a multi-unit property (up to 4 units) and rent out the other units while living in one.
Do VA loans have lower interest rates than conventional loans?
VA loan rates are often slightly lower than conventional rates because the VA guaranty reduces the lender's risk, but the exact rate always depends on your lender, credit profile, and market conditions at the time.
Can I have both a VA loan and a conventional loan at the same time?
Yes. There's no rule against holding both loan types simultaneously, as long as you qualify for each based on your income, credit, and debt-to-income ratio.
What credit score do I need for a VA loan vs a conventional loan?
The VA itself sets no minimum credit score, but most VA lenders look for around 580-620. Conventional loans typically require at least 620, and you'll need 740+ to get the best rates and avoid higher PMI costs.
Sources
This page is educational and is not legal, tax or financial advice. Rules and rates can change, so confirm the details with the VA and your lender.
Run your own numbers
Compare both loans with the VA vs conventional loan calculator → It adds the funding fee and PMI and shows the cost over the years you keep the loan.
VA Loan Payment Calculator — full monthly payment, funding fee, and amortization schedule.
VA Funding Fee Calculator — see your fee and how a down payment changes it.
VA Loan Affordability Calculator — how much house can you afford?
VA Loan Guides — eligibility, closing costs, limits, IRRRL, FHA and more.