VA Loan vs. Conventional With 20% Down: Which Is Better for Veterans?
VA Loan vs. Conventional With 20% Down: Which Is Better for Veterans?
If you're eligible for a VA loan and have enough cash to put 20% down on a home, you may be asking a question I hear from financially established veterans:
Should I still use my VA loan if I can afford a 20% down payment?
Maybe.
Having the money to put 20% down doesn't automatically mean you should. It also doesn't mean a VA loan is automatically the better choice.
I'm a retired Army veteran and a mortgage advisor, and when I'm looking at this decision with another veteran, I don't start with which loan program sounds better.
I run the numbers.
Because the real question isn't simply VA loan vs. conventional loan.
It's:
Which financing strategy puts you in the strongest financial position?
Prefer the Short Version
VA Loan vs. Conventional With 20% Down: The Quick Comparison
Here's the basic difference.
| VA Loan | Conventional With 20% Down | |
|---|---|---|
| 20% down required? | No | Yes for this comparison |
| Monthly PMI? | No | Generally not with 20% down |
| VA funding fee? | May apply; some borrowers are exempt | No |
| Large amount of cash tied up at closing? | Not necessarily | Yes |
| Can you make a down payment? | Yes | Yes |
| Best choice for every veteran? | No | No |
That last line is important.
There is no single answer that's right for every veteran.
Credit profile, interest rates, VA funding-fee status, loan amount, available cash, other debt and long-term plans can all affect which option makes more sense.
Should I Use a VA Loan If I Have 20% to Put Down?
This is where I think veterans need to change the question.
Don't just ask:
“Can I put 20% down?”
Ask:
“What does putting 20% down accomplish for me?”
With a conventional mortgage, reaching 20% down is significant because borrowers can generally avoid private mortgage insurance, or PMI.
A VA loan doesn't require monthly PMI in the first place.
That means an eligible veteran may have the ability to buy the same house while keeping substantially more cash available.
That doesn't automatically make the VA loan better.
But it absolutely makes it worth comparing.
Example: VA Loan vs. 20% Down on a $750,000 Home
Let's use a $750,000 home as an example.
A 20% conventional down payment would be:
$150,000
Before you move $150,000 from your bank account into the equity of a house, I want to know what you're getting in return.
Maybe putting the full $150,000 down is the best move.
But maybe it isn't.
Depending on your circumstances, keeping some of that money available could provide:
- Emergency reserves
- Investment capital
- Money for renovations or improvements
- Funds to pay down higher-interest debt
- Moving and furnishing expenses
- Liquidity for another real estate purchase
- A larger financial cushion after closing
Home equity has value.
Liquidity has value, too.
My job isn't to tell a veteran to put as little money down as possible.
It's to help determine where that money works hardest for that particular borrower.
Would You Put $150,000 Down on a $750,000 Home?
Does a VA Loan Have PMI?
No. VA loans do not require private mortgage insurance.
That's one of the biggest differences between VA and many low-down-payment conventional loans.
With conventional financing, putting 20% down is often attractive because it generally eliminates the need for PMI.
An eligible VA borrower doesn't have to reach the 20% threshold to eliminate monthly PMI because VA loans don't require it.
That changes the math considerably.
What About the VA Funding Fee?
This is an important part of the comparison.
Many VA borrowers pay a one-time VA funding fee. The amount can vary based on factors including the amount of the down payment and whether the borrower has used the VA loan benefit previously.
However, some veterans and servicemembers are exempt from paying the VA funding fee.
If you're exempt, tell me.
That can have a meaningful impact on the VA vs. conventional comparison.
And if you're not exempt, that doesn't automatically make conventional better.
We include the funding fee in the analysis and compare the actual costs.
Can You Put 20% Down on a VA Loan?
Yes.
This gets overlooked surprisingly often.
Using a VA loan doesn't mean you have to put zero down.
Depending on the situation, we can compare several strategies:
VA with 0% down
VA with 5% down
VA with 10% down
VA with 20% down
Conventional with 20% down
Why would we do that?
Because the best answer may be somewhere in the middle.
For example, a veteran may decide that making a smaller VA down payment gives them a comfortable mortgage payment while still preserving substantial cash reserves.
Another veteran may decide that putting 20% down and taking the conventional loan gives them the better overall financial result.
That's why I don't like making this decision based on rules of thumb.
Does Putting Money Down Reduce the VA Funding Fee?
For borrowers who are required to pay the VA funding fee, making a down payment can reduce the funding-fee percentage.
That's another reason I may compare a VA loan at several different down-payment levels instead of only comparing zero-down VA with 20%-down conventional.
If you're exempt from the funding fee, that needs to be factored into the comparison as well.
Is the VA Interest Rate Better Than Conventional?
Sometimes.
But I would never tell someone that a VA loan will always have the better rate.
Mortgage rates and pricing depend on the market and the specific borrower and transaction.
That's why I price both options.
If you're VA eligible and considering putting 20% down, I want to compare the actual VA and conventional options available to you rather than making the decision based on a generic rate you saw advertised online.
Compare real numbers on the same day.
Don't Compare VA and Conventional Loans Based Only on the Monthly Payment
The monthly payment matters.
It just isn't the only number that matters.
When I'm helping a veteran compare VA and conventional financing, I want to look at:
Interest rate
Loan amount
Principal and interest payment
Cash required at closing
VA funding fee, if applicable
Other closing costs
Cash remaining after closing
Total cost over the period you realistically expect to own the home
That last one can be particularly important.
If you realistically expect to own the home for seven years, I want to know what these two strategies look like over seven years.
A 30-year mortgage doesn't necessarily mean you'll keep that exact loan for 30 years.
VA vs. Conventional: Don’t Compare the Payment Alone
When Might Conventional With 20% Down Be Better?
There are situations where conventional financing may be the stronger choice.
You may receive particularly favorable conventional pricing.
You may want a substantially smaller mortgage balance and payment.
You may have significant cash reserves even after making the down payment.
Your specific property or financial circumstances may favor conventional financing.
Or the numbers may simply show that conventional costs less for the period you expect to own the home.
If that's what the numbers show, I'll tell you.
Being eligible for a VA loan doesn't mean you have to use it.
When Might the VA Loan Be Better Even If You Have 20% Down?
VA financing deserves a very serious look when it provides competitive pricing while allowing you to preserve a significant amount of cash.
This becomes especially interesting for veterans purchasing higher-priced homes.
Twenty percent of a:
$500,000 home = $100,000
$750,000 home = $150,000
$1,000,000 home = $200,000
At those numbers, we're not talking about pocket change.
We're making a decision about what to do with six figures of your money.
I want that decision to be intentional.
What I Look at as Both a Veteran and Mortgage Advisor
I served 23 years in the Army.
So I understand why veterans can have strong feelings about the VA loan benefit.
But I don't believe you should use a VA loan simply because you earned the benefit.
And I don't believe you should avoid it because someone told you conventional financing is what financially successful buyers use.
Your VA eligibility is a financial tool.
My job is to help you determine whether using that tool makes sense for this particular purchase.
Sometimes the answer is VA.
Sometimes it's conventional.
Sometimes it's VA with a strategic down payment.
I want to see the numbers before we make that call.
Frequently Asked Questions About VA vs. Conventional Loans
Is a VA loan better than conventional if I can put 20% down?
Not necessarily. The better option depends on the interest rate, loan costs, VA funding-fee status, amount financed, available cash and your overall financial goals. Comparing both options side by side is the best way to make the decision.
Should a veteran put 20% down on a house?
It depends. A 20% down payment can reduce the loan balance and monthly payment, but it also moves a substantial amount of liquid cash into home equity. Veterans eligible for VA financing should compare the benefits of a larger down payment against preserving cash.
Does a VA loan have PMI?
No. VA loans do not require private mortgage insurance.
Can I make a down payment on a VA loan?
Yes. VA borrowers can make a down payment even when one isn't required.
Does a larger VA down payment reduce the funding fee?
For borrowers required to pay a VA funding fee, certain down-payment levels can reduce the funding-fee percentage. Veterans who qualify for an exemption may not have to pay the funding fee.
Can I use a VA loan to buy a $750,000 or $1 million home?
Potentially, yes. VA financing is not limited to inexpensive homes. Eligibility, entitlement, lender requirements, income, credit, property and the borrower's overall qualifications all matter.
Is VA or conventional better for a high-income veteran?
Income alone doesn't determine which mortgage is better. For a high-income or high-net-worth veteran, preserving liquidity may be especially valuable, but the correct decision should be based on a side-by-side analysis of both financing strategies.
The Bottom Line: Compare VA vs. Conventional Before You Put 20% Down
If you're a veteran with enough money to make a 20% down payment, you're in a good position.
You have options.
Don't give up a potentially valuable VA financing option simply because you have the cash to go conventional.
And don't use your VA loan simply because you're eligible.
Compare them.
If you're considering a home purchase, send me the purchase price, the approximate amount you're considering putting down and a little information about your situation.
I'll compare the VA and conventional options side by side so you can see what each one actually costs and decide which strategy makes the most sense for you.
Gary Bourgeois
Mortgage Advisor | Retired Army Veteran
Valor Mortgage Group powered by Barrett Financial Group
NMLS #2074070
This information is provided for educational purposes only and is not a commitment to lend. Loan programs, eligibility requirements, interest rates, fees and terms are subject to change and vary based on borrower and transaction.
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