VA Loan vs. FHA vs. Conventional

Three main choices

Most homebuyers choose from three types of loans:

• VA loans, for eligible Veterans, service members and surviving spouses
• FHA loans, insured by the Federal Housing Administration and open to anyone who qualifies
• Conventional loans, not backed by the government; most are sold to Fannie Mae or Freddie Mac

Down payment

• VA: No down payment required with full entitlement, as long as the price is not more than the appraised value.
• FHA: A small down payment is required, commonly 3.5% for borrowers with qualifying credit scores.
• Conventional: Some programs allow small down payments, but less than 20% usually means paying private mortgage insurance.

Mortgage insurance

This is often the biggest difference.

• VA: No monthly mortgage insurance. Instead, there is a one-time funding fee, which many disabled Veterans do not pay.
• FHA: An upfront premium plus a monthly premium. With a small down payment, the monthly premium usually lasts for the life of the loan unless you refinance.
• Conventional: Private mortgage insurance (PMI) when you put less than 20% down. It can be removed once you reach enough equity, and federal law requires it to end automatically at a set point.

Credit and income

• VA: No VA minimum credit score; lenders set their own. VA uses both a 41% DTI guideline and a residual income test.
• FHA: Known for flexible credit. Minimum scores are set by HUD and lenders.
• Conventional: Usually the strictest on credit. Better scores get better pricing.

Interest rates

VA loans often have some of the lowest rates on the market because of the government guarantee. Rates still depend on your credit, the lender and the market.

Loan limits

• VA: No limit with full entitlement. With partial entitlement, VA uses FHFA county limits ($832,750 baseline in 2026).
• FHA: Has its own county limits, set by HUD each year.
• Conventional: Conforming loans follow FHFA limits. Bigger loans are jumbo loans with tougher rules.

Property and occupancy

• VA and FHA: Must be your primary residence. Both have property standards checked by the appraiser.
• Conventional: Can be used for second homes and investment properties.

Closing costs

VA limits what Veterans can pay, including a cap of 1% for the lender's flat origination charge. FHA and conventional loans have fewer fee limits.

When VA usually wins

• You have little or no down payment.
• You want to avoid monthly mortgage insurance.
• You receive VA disability compensation and do not pay the funding fee.
• You have a higher DTI but strong residual income.

When conventional may win

• You have 20% or more down and strong credit, so there is no PMI and no funding fee.
• You are buying a second home or investment property.
• You want to keep your VA entitlement free for a later purchase.

When FHA may fit

• You are not eligible for VA, and your credit or income would struggle with conventional rules.

Step by step: compare for yourself

1. Get your COE so you know your VA status and funding fee exemption.
2. Ask lenders for side-by-side Loan Estimates on VA, FHA and conventional for the same home price.
3. Compare the monthly payment, including mortgage insurance.
4. Compare cash to close, including the funding fee or upfront premium.
5. Look at the five-year cost: payments plus fees.
6. Pick the loan that fits your plans, not just the lowest rate.

Bottom line

For most people who qualify, a VA loan is hard to beat. But if you have a big down payment, run the conventional numbers too, especially if you are not exempt from the funding fee.