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Conventional vs. VA loans

See which type of loan could get you the best mortgage terms and rates.

Gabrielle Pastorek
Gabrielle Pastorek

Last updated:

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If you qualify for a Veterans Association (VA) home loan, it’s worth considering some of the benefits and drawbacks of a VA loan vs. a conventional loan.

Surveys show that many veterans either don’t realize that VA loans exist or are misinformed about how they work. Before deciding which is right for you, find out how to get the best possible loan rates and options for your new home.

How do conventional loans differ from VA loans?

The biggest difference between conventional and VA loans is VA loans are backed by the government, protecting lenders in the case you can’t pay back your loan. Conventional loans require borrowers to purchase private mortgage insurance (PMI). This can cost hundreds of dollars a month and doesn’t protect you — it protects the bank in case you default on your loan.

Even with the savings on a down payment and PMI, there are pros and cons to both types of loans.

Conventional vs. VA loans

ConventionalVA
Interest RatesGenerally higher than for VA loans.Generally lower than for conventional loans.
FeesNo loan origination fee, but lender fees may apply.Requires upfront loan origination fee.
Down paymentSome programs offer 3% or lower down payment, but you’ll need PMI if less than 20%.None required.
Credit scoreNo set minimum, but most lenders look for a FICO score of at least 620.FICO score of 620 or higher usually required.
Restricted usesCan be used for primary and secondary residences, as well as investment properties.Must meet VA loan eligibility requirements and can only be used for a primary residence.
Name Product Min. credit score State availability Loans offered
LendingTree
LendingTree
620
Available in all states
Purchase, Refinance, Home Equity, HELOC, Jumbo, Reverse, Fixed, Adjustable, FHA, VA, USDA
Connect with vetted home loan lenders quickly through this online marketplace.
See rates
More Info
Vylla
Vylla
620
Not available in: HI, MA, NV, NY, ND, UT
Purchase, Refinance, Jumbo, Fixed, Adjustable, FHA, VA, USDA
Explore financing options and home shopping services all on the same website.
See rates
More Info
New American Funding
New American Funding
620
Not available in: HI, NY
Purchase, Refinance, Jumbo, Fixed, Adjustable, FHA, VA, USDA, Reverse
A hassle-free lender specialized in home loans.
See rates
More Info
Quicken Loans
Quicken Loans
620
Available in all states
Purchase, Refinance, Jumbo, Fixed, Adjustable, FHA, VA, USDA
Flexible options, fast approvals and support online backed by a trusted brand.
See rates
More Info
CIT Bank
CIT Bank
620
Available in all states
Purchase, Refinance, Jumbo, Fixed, Adjustable, FHA
A subsidiary of CIT Group, CIT Bank is a direct lender that offers a variety of mortgage loan options.
More Info
Rocket Mortgage
Rocket Mortgage
620
Available in all states
Purchase, Refinance, Jumbo, Fixed, Adjustable, FHA, VA, USDA
Streamline your mortgage from quote to final payment — all from your computer or phone.
More Info

Compare up to 4 providers

Name Product Min. credit score State availability
Vylla
Vylla
620
Not available in: HI, MA, NV, NY, ND, UT
Explore financing options and home shopping services all on the same website.
See rates
More Info
New American Funding
New American Funding
620
Not available in: HI, NY
A hassle-free lender specialized in home loans.
See rates
More Info
Quicken Loans
Quicken Loans
620
Available in all states
Flexible options, fast approvals and support online backed by a trusted brand.
See rates
More Info

Compare up to 4 providers

Benefit and drawbacks of conventional loans

ProsCons
  • No loan origination fee
  • Can be used for primary residences, secondary residences and investment properties
  • No set minimum credit score
  • Requires PMI if down payment is less than 20%
  • Down payment required
  • Generally has higher interest rates than federally-backed loans

Benefit and drawbacks of VA loans

ProsCons
  • No PMI required
  • No down payment required
  • Generally offers lower interest rates
  • Can only be used for a primary residence
  • Must meet eligibility requirements
  • Loan origination fee required

Case study:

Ralph has served for 10 years in the National Guard and is therefore eligible for a VA loan. He’s looking to purchase his first home, which would be his primary residence, but only has a small amount saved up for a down payment. In Ralph’s case, getting a VA loan for his home would most likely make the most sense, since he wouldn’t be required to have a down payment and won’t have to pay for private mortgage insurance.

Bottom line

Understanding your loan options is an important first step when buying a home or investment property. In most cases, if your home and property are eligible for a VA loan, the benefits outweigh the drawbacks.

If you don’t qualify for a VA loan, there are a number of conventional loan options and programs that can help make your new home as affordable as possible.

Before making a decision, check out a few different lenders and compare all of your home loan options.

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