If you're a current service member, veteran or eligible surviving spouse buying a house, we can help you understand VA loan benefits and decide if a VA or conventional loan is better for your situation.
Article: 4 minutes
Updated: June 22, 2026 Published: November 5, 2018
By: USAA Reviewed by: Editorial contributors
A VA loan may be ideal if you're a service member, veteran, or eligible surviving spouse looking to buy a primary home, especially if you want to avoid a down payment and Private Mortgage Insurance, or PMI. However, a conventional loan might be a better fit if you have a significant down payment, a strong credit profile, or are purchasing a second home or investment property.
It is only natural to want to take advantage of every benefit you've earned through your military service. While VA loans have a lot of advantages, in some circumstances a conventional loan may be a better choice.
Let's compare the two:
VA-guaranteed loans feature several elements:
In most cases, mortgages guaranteed by the VA don't require a down payment.
There's no need for PMI, since the VA guarantee protects lenders if you default on the loan. But most VA loans require a one-time funding fee that varies from 1.25% to 3.30% of the loan amount.
Different factors can impact the fee, such as if the loan is a purchase or refinance, your down payment amount, whether you served in active-duty military, National Guard or Reserves, or if you've used your VA loan eligibility previously.
Although you still need to prove your mortgage payment won't be an excessive proportion of your income, the VA doesn't require a minimum credit score. But your lender may set a minimum credit score.
Interest rates reflect the risk associated with lending money. The VA guarantee reduces the lender's risk, which may result in a lower interest rate for you.
When rates drop, a VA interest rate reduction refinance loan, or VA IRRRL, could provide streamlined processing and easier documentation standards. Your lender or the VA may require an appraisal in some circumstances.
Choosing a conventional loan over a VA loan could be more advantageous depending on your financial goals. Although VA loans offer attractive perks like no required down payment, the absence of an initial investment means borrowing more.
For example, while a VA loan does not require a down payment, the more money you borrow, the larger your monthly mortgage payment and the more money you'll spend on interest over the life of the loan. Buying with little or no money down also means you have little or no equity in the home. That can be a problem if you must sell the home in the first few years of ownership, especially if property values fall. It may require you to bring cash to closing in order to sell the home at a loss, compounding the normal costs of moving.
You may want to consider a conventional loan if you have enough money for a 20% down payment. You won't pay for PMI and you'll avoid the VA funding fee.
Your credit can also be a factor. If you have a strong credit profile, you may find the rate on a conventional loan comparable to or better than what you'd get with a VA-guaranteed mortgage.
Your choice of home is also a key factor: VA loans are strictly for primary residences, meaning they cannot be used for vacation homes or investment properties.
You should also consider the type of home you have in mind: If you're eyeing a vacation house or an investment property, a VA loan is out of the question because it can only be used to finance a primary home. Similarly, if you have a plan to take on a fixer-upper, a VA loan may prove difficult since they have tighter rules regarding the condition of a home.
Finally, the timing of your move is also an important factor. VA loans give you a maximum of 60 days after closing to occupy the home in most cases. So a VA loan may not work if you're planning to buy a house long before you actually move.
Learn more about finding the right mortgage for you.