VA Loan vs. Conventional Loan

The Core Advantage: No Down Payment Required

The single biggest advantage of a VA loan is the ability to purchase a home with zero down payment. On a $350,000 home — a realistic price point in many San Antonio and Omaha neighborhoods near base — a conventional loan typically requires 5% to 20% down. That's $17,500 to $70,000 out of pocket before you've even moved in.

VA loans eliminate that barrier entirely. You can buy with $0 down and keep your savings intact for moving costs, home improvements, or an emergency fund. For military families who move every two to three years, preserving liquidity matters enormously.

Conventional loans do offer low-down-payment options — some as low as 3% — but those come with a catch: private mortgage insurance.

No PMI: The Savings That Keep Giving

Private mortgage insurance (PMI) is required on conventional loans when you put down less than 20%. It typically costs between 0.5% and 1.5% of your loan amount per year — and it protects the lender, not you.

On a $350,000 loan at 1% PMI, that's $3,500 per year — or about $292 every single month added to your payment for no benefit to you. PMI stays on your loan until you've built 20% equity, which can take years.

VA loans have no PMI. Period. The VA guaranty replaces the need for it. That monthly savings alone can make a VA loan dramatically more affordable than a conventional loan with a small down payment, even before you factor in interest rates.

The VA Funding Fee: What It Is and When It's Waived

VA loans do have one cost that conventional loans don't: the VA funding fee. This is a one-time fee paid to the Department of Veterans Affairs that helps keep the program running for future generations of service members.

For first-time VA loan users putting $0 down, the funding fee is currently 2.15% of the loan amount. On a $350,000 purchase, that's $7,525. Subsequent uses of the benefit increase the fee to 3.3%. The fee can be rolled into the loan, so it doesn't have to come out of pocket at closing.

Here's the critical detail many veterans don't know: the funding fee is completely waived if you have a service-connected disability rating of 10% or higher, if you're receiving VA compensation for a service-connected disability, or if you're a surviving spouse of a veteran who died in service or from a service-connected disability. If you have any disability rating at all, confirm your waiver status before closing — it can save you thousands.

Even with the funding fee, the math usually favors VA. The PMI savings alone often recover the funding fee cost within two to three years of ownership.

Interest Rates: VA Usually Wins Here Too

Because the VA guarantees a portion of each loan, lenders take on less risk — and they pass some of that savings to borrowers in the form of lower interest rates. VA loan rates have historically run 0.25% to 0.5% lower than comparable conventional rates.

On a 30-year $350,000 mortgage, a 0.5% rate difference translates to roughly $35,000 in interest savings over the life of the loan. Combined with no PMI and no down payment requirement, the total financial advantage of VA over conventional can be substantial.

Using Your VA Benefit More Than Once

One of the most persistent myths about VA loans is that you can only use the benefit once. That's simply not true. Your VA loan entitlement can be restored and reused multiple times throughout your life.

If you sell your home and pay off the VA loan, your full entitlement is restored and you can use it again on your next purchase. If you still have an active VA loan but have remaining entitlement, you may be able to use a second VA loan simultaneously — a situation common among military families who PCS before selling their current home.

There's also a concept called 'bonus entitlement' (sometimes called second-tier entitlement) that allows you to purchase a higher-priced home even if your basic entitlement is tied up. The rules can get complex, but the bottom line is this: don't assume your benefit is used up. Talk to a VA-approved lender and verify your entitlement status before assuming you need to go conventional.

When Conventional Might Make Sense

In the interest of full transparency: there are situations where conventional can be competitive. If you have a 20% down payment saved and want to avoid the funding fee entirely, a conventional loan with no PMI can be a clean option. Some sellers in competitive markets have historically shown a preference for conventional offers, though this is less common than it used to be and a strong VA offer with an experienced agent can absolutely compete.

Condominiums can also be trickier with VA loans, as the entire condo complex must be VA-approved. If you have your heart set on a specific condo that isn't on the VA-approved list, conventional may be your only path.

But for the vast majority of military buyers purchasing a single-family home near JBSA or Offutt AFB, VA is the stronger choice — financially and practically.