VA vs. Conventional Loans: What Buyers Should Know

Choosing between a VA loan and a conventional loan can be confusing when both programs look good on paper.

A VA loan is a mortgage guaranteed in part by the Department of Veterans Affairs for eligible borrowers, while a conventional loan follows private lending guidelines and does not require military eligibility.

In this guide, I’ll break down the key differences in down payment, mortgage insurance, fees, property rules, and long-term cost.

I’m Matt Jolivette (NMLS# 90661), a mortgage broker with 26 years of industry experience. I help borrowers compare VA and conventional financing throughout Portland, Vancouver, Boise, and the surrounding areas in Oregon, Washington, and Idaho.

Quick Answers About VA and Conventional Loans

• Can I compare both programs? Yes. If you’re eligible for VA financing, it still makes sense to price VA and conventional options side by side.
• Which option usually requires less money down? VA loans may allow zero down for eligible borrowers. Some conventional programs allow 3% down, but qualifications vary.
• Does a VA loan always have a lower rate? No. VA pricing is often competitive, but current market rates depend on the lender, credit profile, loan structure, and other factors.
• Can a seller help with closing costs? Both programs allow seller contributions within program limits. The permitted amount and use of those funds depend on the loan and transaction.
• Do both loans have mortgage insurance? Conventional loans commonly require private mortgage insurance with a smaller down payment. VA loans do not have monthly PMI, although a funding fee may apply.

VA vs. Conventional Loans at a Glance

That table gives you the structure. Your actual payment and cash needed at closing will depend on the purchase price, credit, taxes, insurance, current market rates, and lender guidelines.

How VA Loan Eligibility Works

A VA loan isn’t available to every borrower. Eligibility is based on qualifying military service, and the VA documents that eligibility through a Certificate of Eligibility, commonly called a COE.

A Certificate of Eligibility confirms that the borrower meets the VA’s service requirement, but it does not guarantee loan approval. The lender still reviews income, credit, debts, assets, occupancy, and the property.

VA underwriting also looks at residual income. That’s the money left after major monthly obligations and estimated living expenses. It gives the lender another way to measure whether the payment fits the borrower’s overall financial picture.

Oregon veterans may also want to compare the state’s ODVA loan program. It’s a separate option with its own terms and eligibility rules, so it should be reviewed independently from a federal VA loan.

Down Payment and Cash Needed at Closing

VA loans may allow zero down

For an eligible borrower with sufficient entitlement, a VA purchase loan may finance the home without a down payment. That doesn’t always mean zero cash at closing.

You may still have closing costs, prepaid property taxes, homeowners insurance, and other transaction expenses. Seller credits or lender credits may help with some costs, but each option affects the deal differently.

Conventional loans offer several down payment choices

Some conventional primary residence programs start at 3% down. Other conventional scenarios may require more based on the property, occupancy, loan size, credit profile, or number of financed properties.

A larger down payment can reduce the loan balance and may improve pricing or remove mortgage insurance. But putting every available dollar into the house isn’t always the right call. You also need to consider reserves, repairs, moving expenses, and your monthly comfort level.

Mortgage Insurance vs. the VA Funding Fee

This is one of the biggest differences between the two programs.

VA loans do not charge monthly private mortgage insurance. Most VA borrowers instead pay a one-time funding fee, which supports the loan program. The amount varies based on factors such as first or subsequent use and the down payment.

Some eligible borrowers are exempt from the VA funding fee. Exemption status should be verified through current VA documentation.

Conventional loans commonly require private mortgage insurance when the down payment is below 20%. The cost varies based on credit, down payment, loan type, and insurer. Depending on the loan, conventional mortgage insurance may later be removed after specific equity and payment requirements are met.

Here’s the straight talk. Don’t compare these loans using the interest rate alone. Compare the principal and interest payment, mortgage insurance, funding fee, closing costs, and cash left in your account after closing.

Credit and Income Guidelines Are Different

The VA does not set one universal minimum credit score for every VA loan. Lenders often establish their own credit standards, so requirements can vary.

Conventional loans generally place more weight on credit score, debt-to-income ratio, reserves, and automated underwriting findings. Stronger credit may result in better conventional pricing, while lower scores can affect the rate, mortgage insurance, or approval terms.

Both programs require documented ability to repay. Income may come from employment, self-employment, retirement, disability benefits, or other acceptable sources, provided it meets current program rules. Documentation depends on the type and stability of the income.

VA Appraisals and Property Requirements

Both VA and conventional loans usually require an appraisal, but the standards aren’t identical.

A conventional appraisal is primarily used to support the property value and identify material issues affecting marketability or safety. A VA appraisal also reviews value, along with the VA’s Minimum Property Requirements.

VA Minimum Property Requirements focus on whether the home is safe, structurally sound, and sanitary. They’re not a replacement for a home inspection. An inspection is a separate review performed for the buyer’s information.

VA property standards can matter with older homes or properties needing repairs. That comes up throughout Portland and in parts of Multnomah County, Clackamas County, Washington County, and Clark County. It doesn’t automatically make conventional financing the better choice. It means we need to review the property early so there are no surprises later.

Occupancy and Property Type Rules

VA financing is generally designed for a primary residence. Eligible borrowers may purchase certain one- to four-unit properties if they plan to occupy one unit and meet all other requirements.

Conventional financing offers more flexibility. It may be used for a primary residence, second home, or investment property, with different down payment and reserve requirements for each.

If you’re buying a primary home in Beaverton, Tigard, Lake Oswego, Tualatin, Wilsonville, West Linn, Vancouver, or Boise, either program might be worth reviewing. If the property will be a second home or rental from the start, conventional or another appropriate program will generally be the direction to examine.

Which Loan Has the Better Long-Term Cost?

There isn’t one answer for every borrower. A VA loan’s zero-down option and lack of monthly PMI can be a strong combination. A conventional loan may look better when the borrower has strong credit, a larger down payment, or plans to use the property in a way VA rules don’t allow.

Here’s what I compare:

• Total cash needed to close
• Monthly principal and interest
• Monthly mortgage insurance, if any
• VA funding fee and exemption status
• Rate and lender credits
• Expected time in the home
• Cash reserves left after closing
• Possible refinance or sale plans

A fixed-rate mortgage can provide a stable principal and interest payment under either structure when the program and borrower qualify. Taxes, insurance, and association dues can still change over time.

My honest take is simple. If you’re VA-eligible, don’t assume VA automatically wins and don’t assume conventional is cleaner. Let’s run the numbers both ways so you have real math in front of you.

How to Compare Your Options Before Making an Offer

1. Confirm VA eligibility. Obtain or verify the Certificate of Eligibility and review available entitlement.
2. Review the full financial profile. Look at credit, income, debts, assets, reserves, and the planned occupancy.
3. Price both loan structures. Use the same purchase price and similar lock assumptions for a fair comparison.
4. Calculate total cash to close. Include the down payment, closing costs, prepaid expenses, credits, and fees.
5. Compare the complete monthly payment. Include principal, interest, taxes, insurance, mortgage insurance, and association dues when applicable.
6. Check the property fit. Review condition, occupancy, property type, and any planned repairs before writing the offer.

If you’re planning a purchase or pre-approval, call, text, or email me. I can review your scenario, compare VA and conventional options, and explain the next steps without making the decision for you. No pressure either way.

Frequently Asked Questions

About the Author

Matt Jolivette

Mortgage Broker at Matt Jolivette - Associated Mortgage Brokers · NMLS #90661

Matt Jolivette, NMLS #90661, is a mortgage broker and co-owner of Associated Mortgage Brokers, company NMLS #86136. He began at the company as a loan processor in 2000, became a loan originator in 2001 and became a co-owner in 2011. He earned a Bachelor of Science degree in Finance from Portland State University in 2005.

Specializes in: Conventional, FHA, VA

Licensed in: ID, OR, WA

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