VA vs. Conventional Loans: How to Compare the Real Cost

Ask lenders to price the same purchase price, feasible down payment, term, loan structure, and lock period on the same day. Then compare the funded balances that result: a financed VA funding fee can make the VA balance different from a conventional balance even when the purchase inputs match.

Page 1 of each Loan Estimate shows rate, projected payment, mortgage insurance, and estimated cash to close; page 2 shows origination charges, services, points, lender credits, and other costs. Do not force identical loan amounts when program-specific financed fees legitimately differ.

VA may permit zero down with sufficient entitlement and supported value, subject to approval. Certain conventional programs allow 3% down for eligible first-time or repeat buyers; not every conventional loan does.

Cash to close can include down payment, closing costs, prepaid taxes and insurance, points, escrow funding, and an appraisal gap. Compare the actual line on each estimate rather than assuming low down means no cash.

VA has no monthly private mortgage insurance, but a funding fee may apply unless VA confirms an exemption; financing it raises opening principal. Conventional PMI can apply and may eventually end. Price, payment method, and cancellation depend on the actual loan.

For many covered principal-residence mortgages, borrower-requested PMI cancellation may be available at the scheduled 80% balance with statutory conditions, while automatic termination generally occurs at 78% if current. Appreciation alone does not automatically cancel PMI.

• Review VA funding-fee calculations

Record actual disclosed figures rather than inserting a market quote.

APR helps reflect certain financing charges but does not replace the itemized comparison. Points may lower the rate while increasing upfront cost; lender credits may reduce cash while changing price. Compare both the charge and its effect over the expected holding period.

On Loan Estimate page 3, CFPB's five-year method subtracts principal paid in five years from total paid in five years to estimate interest and fees. Repeat the analysis for the date you expect to sell, refinance, or pay off.

VA limits seller concessions to 4% of reasonable value, not loan amount. Ordinary seller-paid closing costs are separate from concessions such as the funding fee or specified borrower obligations. Conventional limits use different rules.

Have the lender and settlement provider classify each proposed credit, then compare revised estimates with equivalent seller support where feasible.

Add upfront costs and recurring insurance through the likely exit date; compare principal and interest paid, remaining balances, and cash retained after closing. Exemption status, PMI cancellation, and holding period can reverse the result. Use complete disclosures rather than a program slogan.