A VA loan is backed by the Department of Veterans Affairs for eligible service members, veterans, and surviving spouses: most buyers need no down payment, and there is no monthly mortgage insurance, though a funding fee applies. A conventional loan is not government-backed — approval turns on credit and down payment, and private mortgage insurance is required under 20% down.

Eligibility is the first difference

A VA loan starts with eligibility, not credit. The borrower must document qualifying military service and obtain a Certificate of Eligibility (COE) from the VA — most lenders can pull it electronically during the application. A conventional loan has no service requirement at all: any borrower who meets the lender’s credit, income, and down-payment standards can apply.

How the VA guarantee replaces mortgage insurance

The VA does not lend the money. It guarantees a portion of the loan to the lender, and that guarantee is what allows approved lenders to offer no down payment and no monthly mortgage insurance. The cost of the program is carried by a one-time funding fee, which most borrowers finance into the loan; some veterans — including those receiving VA disability compensation — are exempt from the fee. A conventional loan has no guarantor behind it, so when a borrower puts less than 20% down, the lender protects itself with private mortgage insurance (PMI), a monthly charge that typically ends once the loan reaches 80% of the home’s value.

Property and occupancy rules differ too

VA loans are for a primary residence the borrower intends to occupy, and the property must meet the VA’s minimum property requirements at appraisal — a basic soundness standard beyond a conventional appraisal. Conventional loans can finance second homes and investment properties and carry no equivalent federal property overlay. For a military family buying under orders or from a distance, those occupancy and property rules are usually the deciding details, not the rate.