VA loan vs. conventional loan: What's the difference?

Buying a home comes with big decisions, including choosing the right loan. If you qualify for a VA loan and conventional financing, you may wonder which is better.

Read on to learn the difference between a VA loan and a conventional loan, the requirements for each, and the benefits of choosing one over the other.

What is a conventional loan?

In real estate, a conventional loan is any non-government-backed mortgage. They make up most mortgages, including 78.3% of all home purchase mortgages in 2024.

Conventional loans are offered by private lenders, such as banks and credit unions, each with its own borrowing requirements. Many of these loans are “conforming,” meaning they meet the underwriting standards of Fannie Mae and Freddie Mac, two government-sponsored enterprises that buy qualifying loans on the secondary market. Conventional loans that don’t meet these standards, such as jumbo loans, are called “nonconforming.”

What is a VA loan?

A VA loan is a government-backed mortgage guaranteed by the Department of Veterans Affairs (VA) and designed to help military service members, veterans, and their families buy homes.

Compared to conventional loans, VA loans tend to have more lenient borrowing requirements. For example, you don’t need to make a down payment or pay private mortgage insurance (PMI), the minimum required credit score can be lower, interest rates can be more competitive, and closing costs are relatively limited.

Mortgage requirements for VA loans vs. conventional loans

Let’s compare the mortgage requirements for VA loans and conventional loans in more detail:

Credit score

The minimum credit score to qualify for a VA loan is generally lower than that for a conventional loan.

While the VA itself doesn’t set a minimum credit score requirement, participating lenders do. For example, Rocket Mortgage® offers VA loans to borrowers with scores as low as 580.

Meanwhile, minimum credit scores for conventional loans tend to be at least 620, though some conventional loans may accept lower scores.

Down payment

VA loans don’t require a down payment, at least not to meet the VA’s standards. Participating lenders sometimes set their own down payment requirements, but often only when you have a poor credit score or the purchase price is high due to a competitive market.

By contrast, conventional loans always require a down payment. Depending on the lender, this can be as low as 3%. However, anything under 20% will require you to pay some form of mortgage insurance.

Debt-to-income ratio

Your income and existing debt directly impact your ability to afford new mortgage payments. As a result, many lenders look at your debt-to-income ratio (DTI), which measures the proportion of your income that goes toward paying off debt each month, when underwriting loans.

Many VA loan lenders allow DTIs of up to 41%. Meanwhile, you must usually have a DTI of 36% or lower to qualify for a conventional loan, though you may qualify with a DTI of up to 45% or even 50% under some circumstances.

Private mortgage insurance

Private mortgage insurance (PMI) protects lenders if you default on your mortgage. Most conventional loans require you to pay PMI if your down payment is less than 20%. The fee is often wrapped into your monthly payment and falls off once you reach 20% home equity. 

VA loans are different. They don’t require any mortgage insurance, no matter how little you put down. Instead, you must pay a VA funding fee (more on this below).

Property eligibility

If you want to buy a primary residence, either a VA loan or a conventional loan will do. However, if you want to buy a second home or an investment property, you can’t use a VA loan, since it’s only available to buyers who live in the property. That said, you may be able to buy a multi-unit property and live in one unit while renting out the others (aka house hacking).

Conventional loans allow you to buy second homes and investment properties. However, you’ll still need to maintain an acceptable DTI, which could limit how many additional properties you can get with conventional financing.

Borrower eligibility

There are no special eligibility requirements for conventional loans. As long as you meet the lender’s standards for minimum credit score, DTI, etc., you can qualify for a loan.

To qualify for a VA loan, however, you must obtain a Certificate of Eligibility, which is only available to veterans, active-duty military service members, and surviving spouses under certain circumstances. National Guard and Reserve members may also qualify.

Borrower fees

Both conventional loans and VA loans come with borrower fees that can include origination fees, settlement and title fees, and taxes and government fees. According to Fannie Mae, these typically amount to 2-5% of the value of your mortgage.

VA funding fee

On top of paying traditional closing fees, VA loan borrowers must pay a VA funding fee. It’s a one-time charge to help cover the cost of the loan and protect against default. You can pay it all up-front or roll it into the loan to pay it off over time.

Depending on whether you’ve had a VA loan in the past and the size of your down payment, the VA funding fee could be anywhere from 1.25% to 3.3% of the loan amount.

Additional requirements to consider

Finally, here are a few more differences between VA loans and conventional loans to consider:

• VA loans don’t set maximum mortgage size limits, but most conventional loans do. For example, in 2025, the maximum amount you can borrow for a single-family home in most parts of the U.S. with a conforming loan is $806,500.
• VA loans tend to have slightly lower mortgage rates than conventional loans. This is because VA loans are backed by the government, making them less risky for lenders. 
• The VA caps some closing costs. For example, VA loan origination fees are capped at 1% of the loan amount. This isn’t the case for conventional loans.

What are the benefits of a VA loan?

When you get a VA loan, you don’t need to make a down payment or pay mortgage insurance, and you can often qualify with a lower credit score and lock in a lower interest rate. These are major benefits that largely result from the VA guaranteeing the loan.

What are the benefits of a conventional loan?

Unlike VA loans, conventional loans don’t have special eligibility requirements related to military service and are more widely available as a result. They also aren’t restricted to financing primary residences. You can use them to buy second homes and investment properties, too.

The bottom line: Selecting a loan type is a personal choice

The right choice between a VA loan and a conventional loan ultimately comes down to your personal situation.

If you’re an eligible service member, veteran, or surviving spouse, a VA loan can be an excellent option thanks to its no-down-payment requirement, no PMI, and generally lower credit score and interest rate requirements.

However, if you don’t qualify for VA benefits or you’re looking to purchase a second home or investment property, a conventional loan may be the better fit.

No matter which loan type you choose, Rocket Mortgage offers it. Start your application today and take the next step toward homeownership.