Who Can Use a VA Loan?

VA loans are available only to eligible veterans, active-duty service members, and certain surviving spouses. Eligibility generally requires:

• 90 consecutive days of active service during wartime
• 181 days of active service during peacetime
• More than 6 years of service in the National Guard or Reserves
• Surviving spouse of a service member who died in service or from a service-connected disability

Eligible borrowers must obtain a Certificate of Eligibility (COE) from the VA, which your lender can typically obtain on your behalf. If you’re eligible, understanding the full value of this benefit is essential before choosing conventional financing. See our full VA loan guide for complete eligibility requirements.

Down Payment

This is the most significant VA loan advantage for most borrowers:

• VA loan: 0% down payment required. No down payment needed regardless of purchase price (subject to county loan limits if you have existing VA entitlement in use)
• Conventional loan: 3–20% down payment depending on program and lender requirements

The ability to buy with zero down is a substantial benefit — especially in high-cost markets where saving a 5–10% down payment can take years. Use our VA loan calculator to model a zero-down scenario for your target price.

Mortgage Insurance

This is the second major VA advantage:

• VA loan: No mortgage insurance — ever. Not at 0% down, not at 5% down, not at any down payment level.
• Conventional loan: PMI required when down payment is less than 20%, typically 0.2%–1.5% annually

On a $400,000 home with 0% down, a conventional borrower (if that were even possible) would pay $200–$400/month in PMI. A VA borrower pays zero. This is a massive long-term cost difference.

The VA Funding Fee

VA loans charge a one-time funding fee instead of ongoing mortgage insurance. For 2026:

• First use, 0% down: 2.15% of the loan amount
• First use, 5–9.99% down: 1.50%
• First use, 10%+ down: 1.25%
• Subsequent use: 3.30% (0% down)

The funding fee can be financed into the loan rather than paid at closing. Some borrowers are exempt from the funding fee entirely — including veterans receiving VA disability compensation and surviving spouses of veterans who died in service.

On a $400,000 loan with 0% down (first use), the funding fee is $8,600 — less than two years of PMI on a conventional loan. Over a full mortgage term, the VA loan wins easily.

Interest Rates

VA loans consistently offer lower interest rates than conventional loans. Because the VA guarantees the loan, lenders take on less risk and pass some of that savings to borrowers. In most markets, VA rates run 0.25%–0.5% below conventional rates for similarly qualified borrowers.

On a $400,000 loan, 0.5% lower rate equals about $130/month — or nearly $47,000 over a 30-year term.

Credit Requirements

The VA itself does not set a minimum credit score — individual lenders do. Most VA lenders require:

• 620 minimum credit score (some lenders go as low as 580)
• Conventional loans typically require 620–640 minimum, with pricing advantages starting at 680+

For borrowers in the 580–640 credit score range, a VA loan is often the only path to a competitive mortgage. Review our credit score guide for more on how scores affect rates and eligibility.

Debt-to-Income Ratio

VA loans use a “residual income” calculation in addition to DTI — they assess whether you have enough income left over after paying all debts and housing costs to maintain a reasonable standard of living. This system can actually be more flexible than conventional DTI limits for some borrowers.

• VA: No maximum DTI is set by the VA; lenders typically allow up to 41–50% with strong residual income
• Conventional: Maximum 45–50% DTI

Property Requirements

Like FHA loans, VA loans have Minimum Property Requirements (MPRs). The home must be safe, structurally sound, and sanitary. This can complicate purchases of fixer-uppers or distressed properties that wouldn’t pass VA appraisal.

Conventional loans have no minimum property condition standards beyond what’s needed to establish value — making them easier to use on older or imperfect homes.

Side-by-Side Comparison

When VA Beats Conventional

• You’re eligible and have less than 20% down — VA is almost always better
• Your credit score is below 660 — VA rates will be significantly better
• You want the lowest possible monthly payment with no MI
• It’s your first VA loan use (lower funding fee)

When Conventional Might Make More Sense

• You have 20%+ down and excellent credit — the funding fee makes VA less compelling when there’s no PMI savings to offset it
• You’re buying a fixer-upper that won’t pass VA MPRs
• You’ve used your VA entitlement previously and the subsequent-use funding fee (3.30%) is high relative to your down payment
• You need a loan above the VA county limit and don’t want to make a down payment on the excess

The Bottom Line

If you’re eligible for a VA loan and putting down less than 20%, the VA loan wins in virtually every scenario — lower rate, no PMI, and competitive funding fee. The only real reason to choose conventional over VA as an eligible borrower is if you have 20%+ down and excellent credit, making the conventional terms competitive enough to justify skipping the funding fee.

Want a side-by-side rate and payment comparison based on your specific situation? Speak with a mortgage advisor who specializes in VA loans.