VA vs Conventional Loan: Which Is Right for You?
Choosing between a VA loan and conventional mortgage? This comprehensive guide compares down payments, mortgage insurance, credit requirements, and total costs to help California homebuyers make the best decision for their situation.
Quick Side-by-Side Comparison
| Feature | VA Loan | Conventional Loan |
|---|---|---|
| Down Payment Requirement | 0% - No down payment required | 3% - 20% depending on program |
| Mortgage Insurance | None - No PMI ever | PMI required if down payment < 20% |
| Credit Score Minimum | 580-620 (lender varies, no VA minimum) | 620 minimum (780+ for best rates) |
| Eligibility Requirements | Veterans, active military, eligible spouses | Anyone who meets credit/income requirements |
| Interest Rates | Typically 0.25-0.5% lower than conventional | Market rates based on credit score |
| 2026 Loan Limits (CA High-Cost) | No limit with full entitlement | Up to $1,249,125 |
| Funding Fee / Upfront Costs | 2.3% first-time use (can be financed) | No funding fee |
| Best For | Eligible veterans wanting lowest costs | Non-veterans or those buying investment property |
Last verified: January 2026. Rates and requirements subject to change.
VA Loan Advantages
For eligible veterans and active military, VA loans offer significant benefits that can save tens of thousands of dollars over the life of the loan.
No Down Payment Required
Purchase a home with $0 down, even in California's high-cost markets. On a $800,000 home, that is $160,000 you can keep in savings compared to a 20% conventional down payment.
No Mortgage Insurance Ever
VA loans never require PMI, regardless of down payment. This saves $300-$500 monthly compared to conventional loans with less than 20% down, totaling over $50,000 in savings over a 30-year loan.
Lower Interest Rates
VA loans typically offer rates 0.25-0.50% lower than conventional mortgages. On a $700,000 loan, this can save over $100 per month or $36,000+ over the life of the loan.
No Loan Limits (Full Entitlement)
Veterans with full entitlement have no loan limit in California, perfect for expensive markets like Los Angeles and Orange County where median home prices exceed $800,000.
Conventional Loan Advantages
Conventional loans offer flexibility and benefits that make them the right choice for many borrowers, especially those who can make a substantial down payment or need property type flexibility.
No Funding Fee
Unlike VA loans, conventional mortgages have no funding fee. On a $700,000 loan, this saves $16,100 upfront compared to the VA's 2.3% first-time funding fee.
Anyone Can Qualify
No military service requirement. Anyone who meets credit and income requirements can apply, making conventional loans the only option for non-veterans.
More Property Types
Purchase primary residences, second homes, vacation properties, or investment rentals. VA loans are limited to primary residences only (except multi-unit owner-occupied).
PMI Cancellation at 20% Equity
Private mortgage insurance automatically cancels when you reach 78% loan-to-value, or you can request removal at 80%. With California's appreciation, this often happens within 5-7 years.
Which Loan Should You Choose?
Choose VA Loan If...
- You are an eligible veteran, active military, or surviving spouse
- You want to buy with little to no down payment
- You want to avoid ongoing PMI payments
- You have a lower credit score (580-620)
- You are buying a primary residence
- You plan to stay in the home 5+ years
Choose Conventional If...
- You are not eligible for VA loan benefits
- You can put 20% down to avoid PMI entirely
- You are buying a second home or investment property
- You have excellent credit (740+) for the best rates
- You want to avoid the VA funding fee
- You need faster closing times
2026 VA Funding Fee Breakdown
The VA funding fee is a one-time charge that helps sustain the VA loan program. Understanding how it works can help you plan your purchase and potentially reduce costs.
| Down Payment | First-Time Use | Subsequent Use |
|---|---|---|
| 0% down payment | 2.3% | 3.6% |
| 5% - 9.99% down | 1.65% | 1.65% |
| 10% or more down | 1.4% | 1.4% |
Funding Fee Exemptions
The following groups are exempt from the VA funding fee: veterans with service-connected disabilities rated 10% or higher, surviving spouses of veterans who died in service or from service-connected disabilities, Purple Heart recipients serving on active duty, and veterans entitled to receive compensation for service-connected disabilities.
Frequently Asked Questions
Ready to Compare Your Options?
Whether you qualify for a VA loan or are considering conventional financing, we can help you find the best mortgage solution for your financial situation. Our specialists will provide a personalized comparison based on your specific circumstances.
Licensing and Disclosure
This comparison is provided for educational purposes. Loan terms, rates, and requirements vary by lender and individual circumstances. Interest rates and loan programs are subject to change without notice. For specific guidance on which loan is right for your situation, consult with a licensed mortgage professional.
Licensing & Regulatory Information
Company: 21st Century Lending, Inc. | NMLS Company ID: 241835
Licensed Loan Originator: Aditya Choksi | NMLS ID: 2055084 | DRE License: 02154132
Licensed by the California Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act. Also licensed in Arizona, Colorado, Georgia, New Mexico, and Washington.
This is not a commitment to lend. Loan approval subject to credit approval and property appraisal. All loans subject to underwriting approval. Rates, terms, and programs subject to change without notice. Not all applicants will qualify. Not all products and services are available in all states.