VA Loans vs Conventional Loans: Which Mortgage Option Is Right for You?

When you're planning to buy a home, one of the biggest decisions is choosing between a VA loan vs conventional loan. Both mortgage options come with benefits, but which one fits your financial goals and eligibility? At Midwest Mortgage, we help veterans and civilians alike understand how to make the right mortgage decision based on real-world numbers—not just surface-level comparisons.

If you've searched "VA loans vs conventional" online, you’ve likely found lists of pros and cons. But what matters most is how each loan type aligns with your financial situation, long-term goals, and homeownership plans in 2025.

Understanding VA Loans and Conventional Loans

VA Loans are backed by the U.S. Department of Veterans Affairs and are designed for eligible military service members, veterans, and certain surviving spouses. With no down payment, no private mortgage insurance (PMI), and competitive interest rates, VA loans are among the most affordable mortgage options in the current market.

Conventional Loans are not backed by a government agency and are offered by private lenders. These loans are available to all qualified borrowers and are often preferred by buyers with strong credit, stable income, and a sizable down payment.

1. Qualification and Eligibility

VA Loans

To qualify, you need to meet active duty, veteran, or service-related eligibility standards. A Certificate of Eligibility (COE) is required. Lenders generally look for a minimum credit score of 620, but guidelines are more flexible than conventional loan options.

Conventional Loans

Approval is based on credit score, income, employment history, and debt-to-income ratio. A minimum credit score of 620 is required, but to access the most competitive rates in 2025, borrowers typically need a score of 740 or higher.

2. Down Payment and Mortgage Insurance

VA Loans

VA loans require no down payment, allowing buyers to finance 100% of the home's purchase price. They also do not require PMI, regardless of the down payment amount. This eliminates a major recurring cost that many other borrowers must budget for.

Conventional Loans

Borrowers generally need to put down at least 3% to 5%, with 20% needed to avoid PMI. PMI typically ranges from 0.5% to 1.5% of the loan amount annually, which can significantly increase monthly payments until the borrower reaches 20% equity.

3. Interest Rates and Fees

VA Loans

Because VA loans are backed by the government, they typically offer lower interest rates than conventional mortgages. These loans do require a one-time VA funding fee, which ranges from 1.25% to 3.3%, depending on service status and down payment. Many borrowers choose to finance the fee into the loan. Certain veterans, such as those with service-related disabilities, are exempt from this fee.

Conventional Loans

Rates are determined by credit score, loan size, and other financial factors. In 2025, well-qualified borrowers can secure competitive rates, but even small credit issues can raise borrowing costs. Conventional loans also come with origination fees, discount points, and third-party closing costs.

4. Appraisals and Property Use

VA Loans

VA loans require a VA appraisal, which ensures that the property meets minimum standards for safety and livability. These appraisals may result in additional repair requirements. VA loans are limited to primary residences only—they cannot be used for vacation homes or investment properties.

Conventional Loans

Appraisals are required but generally more flexible. Conventional loans can be used to finance primary residences, second homes, and investment properties, offering broader property options.

5. Loan Limits and Flexibility

VA Loans

As of 2020, eligible borrowers with full entitlement face no official loan limit. This remains in effect in 2025, meaning qualified buyers can purchase high-value homes without needing a down payment. However, individual lenders may apply internal caps based on risk.

Conventional Loans

Conventional loans must conform to limits set by the Federal Housing Finance Agency (FHFA), which in 2025 is $766,550 for most areas and higher in designated high-cost counties. Loans above that amount are considered jumbo loans and require stricter approval guidelines.

6. Long-Term Affordability

VA Loans

With lower interest rates, no PMI, and zero down payment, VA loans typically result in lower total loan costs over time. This makes them especially appealing for first-time buyers or those looking to maximize monthly cash flow and long-term equity.

Conventional Loans

Conventional borrowers with excellent credit and large down payments can also achieve affordability. However, those putting down less than 20% will face PMI and may pay more over the life of the loan, even if their monthly payments look similar at first glance.

7. Closing Costs and Speed

VA Loans

VA loans come with limits on buyer-paid closing costs, helping keep upfront expenses under control. In competitive markets, VA loan appraisals and processing may take slightly longer, but this varies by lender.

Conventional Loans

Closing costs generally range from 2% to 6% of the home’s value, depending on the lender and location. Since the process is more widely used, conventional loans may close faster—but this isn't always the case, especially in busy markets.

Got it — here’s a revised, concise final thought section for your blog that still favors VA loans without sounding overly long or biased:

Final Thoughts: Which Mortgage Option Is Right for You?

If you're eligible for a VA loan, it’s often the more affordable and flexible choice—thanks to no down payment, no PMI, and lower interest rates. While conventional loans work well for borrowers with strong credit or those buying second homes, VA loans offer long-term savings that are hard to match.

Still unsure? Midwest Mortgage can help you compare both options and make the choice that fits your goals and budget.

Let’s Find Your Best Mortgage Fit

Still deciding between VA loans vs conventional loans? Contact Midwest Mortgage for a personalized consultation. We’ll review your eligibility, calculate savings scenarios, and help you take the next step toward confident homeownership.

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