VA loans vs. conventional loans: What’s the difference?

VA loans offer 100-percent home financing to qualified veterans, active-duty servicemembers and surviving spouses. If you’re eligible for a VA loan, you might assume it’s a better option than a conventional loan — but that’s not always the case. Here’s how they compare.

VA loans vs. conventional loans

Military service isn’t the only difference between VA and conventional loans. When deciding between a VA loan and a conventional loan, consider your down payment savings, credit score, debt load and the type of property you’re looking to finance.

VA loans

VA loans are for members of the military and veterans and can be used to purchase, build or refinance a home. They’re backed by the U.S. Department of Veterans Affairs (VA), meaning the VA guarantees the loan on behalf of the mortgage lender in the event the borrower stops making payments. VA loans are only available from VA-approved mortgage lenders.

VA loans typically don’t require a down payment, and they tend to have lower interest rates and looser credit standards than conventional loans. They also don’t charge mortgage insurance, but VA loan borrowers will pay a funding fee, a one-time charge of up to 3.3 percent of the loan amount.

Conventional loans

Conventional loans are the most popular type of mortgage. In contrast to VA loans, they aren’t backed by the government. They’re available through many kinds of mortgage providers, including banks and online lenders.

For the most part, conventional loans have stricter financial requirements than VA loans. You’ll also need to purchase private mortgage insurance (PMI) if your down payment is less than 20 percent. However, you can use a conventional loan for properties — like vacation homes — that aren’t eligible for VA loans.

VA loan vs. conventional loan requirements

The key differences between VA loans and conventional loans include:

Credit score for VA loan vs. conventional

VA loans sometimes have a more relaxed credit threshold compared to conventional loans. That’s because the VA doesn’t impose a minimum credit score requirement. Some lenders, however, do set their own minimum — known as an “overlay” — which is often 620. With a conventional loan, you’ll almost certainly need a credit score of at least 620.

Down payment for VA loan vs. conventional

For most, the biggest appeal of a VA loan is the fact that there’s no requirement to put money down in most cases. For a conventional loan, you’ll need to put at least 3 percent down.

DTI ratio for VA loan vs. conventional

Your debt-to-income (DTI) ratio is the percentage of your gross monthly income spent on debt obligations, such as a car payment or student loans. Say you bring in $4,500 a month and spend $1,200 of that on debt payments. In this case, your DTI ratio would be about 27 percent.

Again, the VA doesn’t impose a maximum DTI ratio, but many lenders like to see this figure at or below 41 percent. For a conventional loan, most lenders require a DTI ratio of 36 percent or less, but some accept up to 43 percent or even 50 percent.

Mortgage insurance for VA loan vs. conventional

While you pay for mortgage insurance, it protects your lender if you default on your mortgage. With a conventional loan, you’ll need to pay these insurance premiums if you put down less than 20 percent. VA loans don’t require mortgage insurance.

Property eligibility for VA loan vs. conventional

You can only use VA loans to buy a primary residence. On the other hand, you can use a conventional loan to purchase a primary residence, a vacation home or an investment property.

Fees for VA loan vs. conventional

Both types of loans come with closing costs, such as an appraisal fee or title insurance. VA loans also charge a funding fee of up to 3.3 percent of the amount you’re borrowing. Disabled veterans who receive disability payments are exempt from the VA funding fee.

Loan limits for VA loan vs. conventional

For VA loans and conventional loans, your loan limit is largely dependent on what you can get approved to borrow. When it comes to conventional loans, you can get one that’s subject to conforming loan limits — $806,500 for most parts of the U.S. in 2025, and $1,209,750 in higher-cost areas — or, if you can meet more stringent financial qualifications, you could get a jumbo loan for a higher amount.

The VA doesn’t set a loan limit, but your lender will still review your finances and decide how much to let you borrow. If you qualify, jumbo loans are available. Note that if you’ve previously used a VA loan and still own the home, or if you’ve defaulted on a VA loan before, you won’t have full entitlement — and that may impact how large a mortgage you can get.

Is a VA loan better than a conventional loan?

VA loans aren’t necessarily better or worse than conventional loans. If your military experience makes you eligible for a VA loan, it may be easier, from a financial perspective, to qualify for one. If you qualify for both, however, here’s how to decide between them:

Choose a VA loan if:

• You can get a better rate on a VA loan. The rates on VA loans can be more attractive than conventional loan rates, but it depends on your lender and your financial situation. Be sure to factor fees and closing costs — including the funding fee — into your final calculation.
• You have full entitlement and live in a high-cost area. VA loan benefits can be especially enticing if, where you live, it could take years to save up a down payment.

Choose a conventional loan if:

• You can make at least a 20 percent down payment. This way, you won’t pay PMI, and you also won’t pay the VA funding fee.
• You want to buy anything other than a primary residence. You can’t use a VA loan to buy a vacation home or an investment property.

FAQ

• Are VA loans easier to get than conventional loans?

  VA loans might come with looser credit score requirements than conventional loans, which can make them easier to get. But to get a VA loan, you must first obtain a Certificate of Eligibility (COE), a document tells lenders that you qualify for VA home loan benefits. To get a COE, you must meet specific requirements, and having one doesn’t guarantee you will be approved for a mortgage. Working with a lender who has a lot of experience with underwriting VA loans can also help the process go more smoothly.

   

• Do sellers prefer conventional over VA loans?

  There’s a perception that VA loans take longer to close than conventional loans, which might be a turn-off for some sellers. In addition, homes that will be financed with a VA loan must meet minimum property requirements during the appraisal for the deal to close. Still, the benefits of a VA loan can make them a better option for homebuyers, particularly first-timers.

• Do VA loans take longer to close than conventional loans?

  While many people believe that government-backed loans, like VA loans, take longer to close than conventional loans, that’s not necessarily true. As of February 2025, the average time to close for a conventional purchase loan was 43 days, according to ICE Mortgage Technology. VA loans also tend to close in between 40 and 50 days, according to Veterans United, a lender specializing in VA loans.