The Core Differences Between VA and Conventional Loans
Down payment: VA loan requires $0 in most cases. Conventional loans typically require 3 to 20% of the purchase price.
Private Mortgage Insurance: VA loans have none, ever. Conventional loans require PMI if you put down less than 20%.
Interest rates: VA loan rates are usually lower than conventional rates because the loan is government-backed. Conventional rates depend heavily on credit score and down payment size.
Credit requirements: VA loans are more flexible. The VA does not set a minimum credit score, and most lenders accept scores as low as 580 to 620. Conventional loans typically require 620 to 720 or higher for competitive rates.
Funding fee: Most VA borrowers pay a one-time funding fee (typically 1.4 to 3.6% of the loan amount depending on your situation). Veterans with service-connected disabilities rated 10% or higher are exempt. Conventional loans have no funding fee, but PMI can cost 0.5 to 1.5% annually until you reach 20% equity.
When the VA Loan Is the Clear Winner
For most veterans, the VA loan wins on almost every metric. If you do not have 20% saved for a down payment, the VA loan lets you buy now without PMI. If you want the lowest possible monthly payment, the VA loan's combination of no PMI and lower rates is hard to beat. If your credit is less than perfect, the VA loan's more flexible requirements are a significant advantage. And if you are a first-time buyer, the VA loan is one of the most powerful tools available to you.
The math usually looks like this: a veteran using a VA loan on a $465,000 home (our market average) avoids a down payment of $93,000 (20%) or pays no PMI, saving hundreds of dollars per month compared to a conventional loan with less than 20% down.
When a Conventional Loan Might Make Sense
There are limited scenarios where a veteran might reasonably choose conventional financing: you have 20% or more saved and want to avoid the VA funding fee entirely (though the monthly savings from no PMI on VA still often tip the scales), the property does not meet VA minimum property requirements and you are buying it as-is, you are buying an investment property (VA loans are for primary residences only), or you want to preserve your VA entitlement for a future purchase.
Even in these cases, it is worth running the numbers side by side with a VA-specialist lender before deciding.
What About VA Loan Limits?
As of 2020, veterans with full VA entitlement have no VA loan limit. You can buy a home at any price point without a required down payment, assuming you qualify income-wise. This is a significant change that many veterans do not know about.
If you have used your VA entitlement before and have not fully restored it, limits may apply. Our preferred VA lenders can calculate your remaining entitlement and walk you through your options.
How We Help Veterans Make the Right Call
The right answer depends on your credit score, your savings, your disability rating, whether you have used your VA benefit before, and the specific property you are buying. When you work with the Shaina McAndrews Team, we connect you with a VA-specialist lender who will run both scenarios with real numbers so you can make an informed decision. No pressure. No sales pitch. Just the information you need.
Not sure whether to use your VA loan or go conventional? The Shaina McAndrews Team will connect you with a trusted VA lender who can run the numbers for your specific situation. Schedule a free consultation at montcoliving.com. We serve veterans across Montgomery County and Greater Philadelphia.
