A Virginia buyer purchasing a $400,000 home with a 6.50% 30-year fixed rate sees the VA loan vs conventional decision in real dollars. With a VA loan, a first-use borrower making no down payment finances the $400,000 price plus a 2.15% funding fee of $8,600, for a $408,600 loan and estimated principal-and-interest payment of $2,583 per month. With a conventional loan at 5% down, the buyer brings $20,000 down, borrows $380,000, and has estimated principal and interest of $2,402 plus assumed monthly private mortgage insurance of $190, or $2,592. The VA option is about $9 less per month in this example, preserves $20,000 in cash, and avoids PMI. Over five years, that payment difference is about $540 before accounting for mortgage insurance changes, rate differences, taxes, insurance, and home-price appreciation.
The comparison is not simply about the lowest payment. Eligibility, cash reserves, funding-fee status, credit profile, property condition, and how long you expect to keep the home all matter. For Virginia veterans and eligible service members, VA financing can be extraordinarily strong. For buyers with substantial down payments or a long-term plan, conventional financing can be equally compelling.
By Duane Buziak, NMLS #1110647
Table of Contents
- VA and conventional loan basics
- Virginia purchase-price context
- Where VA financing wins
- When conventional financing may fit better
- Credit and prequalification without a hard pull
- Comparing broker options and costs
- Frequently asked questions
VA Loan vs Conventional: The Core Difference
A VA loan is available to eligible veterans, active-duty service members, certain surviving spouses, and qualifying National Guard or Reserve members. It is backed by the Department of Veterans Affairs and generally offers no required monthly mortgage insurance, no required down payment within the county limit, and flexible underwriting for eligible borrowers.
Conventional financing is not a government-backed mortgage program. It can be purchased by a broader range of buyers, including first-time purchasers, move-up buyers, second-home purchasers, and investors. Conventional financing can require as little as 3% down for eligible primary-residence buyers, though pricing and mortgage insurance usually improve with higher down payments and stronger credit.
In Virginia, the 2026 baseline conforming loan limit is $832,750 for a one-unit property in most counties. Higher-cost limits can apply in certain markets. That matters in areas such as Arlington, Alexandria, and Fairfax County, while buyers in Richmond, Glen Allen, Chesterfield, Fredericksburg, and Virginia Beach are commonly shopping well below the baseline limit.
Virginia Prices Make Cash-to-Close a Major Decision
Statewide, Virginia REALTORS reported a 2024 median sales price of approximately $420,000. Local numbers can move quickly: Redfin reported a Chesterfield County median sale price near $430,000 in spring 2025, while Henrico County homes traded around the low-$400,000 range during the same period. Charlottesville and Albemarle County typically command higher entry points, while parts of Roanoke and Lynchburg may offer more purchase-price flexibility.
Those figures change the value of a no-down-payment option. On a $430,000 Chesterfield County purchase, a 5% conventional down payment is $21,500 before closing costs. A VA buyer who is eligible and approved at zero down may keep that money available for reserves, repairs, moving, or future goals.
Virginia market conditions remain competitive for well-priced homes, particularly in Short Pump, Midlothian, Glen Allen, and select Hampton Roads neighborhoods. Inventory has improved from the tightest years, but clean offers still matter. A financing plan should help you compete without draining every available dollar at closing.
Where a VA Loan Can Be the Better Fit
VA financing often stands out when the borrower has limited cash for a down payment, a credit profile that does not qualify for top-tier conventional pricing, or a desire to eliminate monthly PMI. There is no universal VA credit-score minimum set by the program, but many broker channels commonly look for scores around 580 to 620, depending on the full file. Conventional financing commonly starts around 620, while the best pricing frequently appears at 740 and above.
The VA funding fee is the main trade-off. For a first-time VA user making less than 5% down, the fee is typically 2.15% of the base loan amount. Subsequent use with less than 5% down can carry a 3.3% fee. Some eligible veterans are exempt from the funding fee, which can materially improve the equation. The fee may be financed, but financing it increases the loan balance and interest paid over time.
VA appraisals also have property-condition requirements. A home with significant peeling paint, safety concerns, a failed roof, or nonfunctioning utilities may need repairs before closing. That is not automatically a deal-breaker, but it can affect timelines when buying an older home in Richmond, Williamsburg, or rural Louisa County.
When Conventional Financing May Fit Better
Conventional financing may be the cleaner choice when you are not VA-eligible, are buying a second home or investment property, want to avoid the VA funding fee, or have enough cash and credit strength to earn favorable pricing. A buyer putting 20% down generally avoids PMI. A buyer with 10% to 15% down may still choose conventional financing because PMI can be reduced or eventually removed as equity grows, subject to program rules.
Conventional loans can also be useful for certain property types and occupancy situations. Investors may need DSCR or non-QM financing rather than VA or standard conventional financing, while self-employed buyers may benefit from bank-statement programs when tax-return income does not reflect their actual qualifying capacity.
Reserve expectations vary. A typical primary-residence conventional file may require no reserves beyond closing funds, while a second home or investment property can require two to six months of total housing payments. VA primary-residence files are often more flexible, but strong reserves can still help when income, credit, or appraisal conditions need support.
| Comparison point | VA loan | Conventional loan |
|---|---|---|
| Broker access | Available through approved VA broker channels | Broad agency and portfolio broker-channel options |
| Typical FICO floor | Often 580-620, depending on file and channel | Commonly 620, with stronger pricing at higher scores |
| Down payment | Potentially 0% for eligible buyers | Often 3%-5% minimum for eligible primary residences |
| Monthly mortgage insurance | No monthly PMI | Usually required below 20% down |
| Program breadth | Primary residence for eligible borrowers | Primary, second home, and select investment uses |
| Pricing flexibility | Funding fee may apply and may be financed | Pricing changes with FICO, down payment, occupancy, and PMI |
Protect Your Credit Before You Choose
Before comparing payments, start with a soft credit pull mortgage review. A soft-pull prequalification can provide a useful view of score range, liabilities, estimated buying power, and likely program fit without a hard inquiry. It is a practical answer for buyers searching for mortgage pre approval without hard pull options or a no credit hit mortgage application.
A full application and underwriting review may eventually require a hard inquiry. Still, there is no reason to begin with a hard pull before you understand whether VA, conventional, FHA, jumbo, or a non-QM option fits your objective. Ask for a no hard inquiry mortgage pre approval conversation first, then decide when a complete credit report makes sense.
Costs Beyond the Rate
Closing costs commonly range from about 2% to 5% of the purchase price, depending on prepaid taxes, insurance, title work, escrows, and whether the seller contributes. On a $400,000 purchase, that can mean roughly $8,000 to $20,000 before negotiated credits. Ask about our no-out-of-pocket closing options if cash-to-close is the obstacle.
Rates matter, but so do origination charges, discount points, underwriting conditions, and title expenses. In any cost comparison, include the fact that our preferred title company can save an additional $2,000 on average. That saving should be reviewed alongside the full loan estimate rather than treated as a substitute for comparing rate, payment, and total cash required.
Colonial 1st Mortgage appears in Richmond and Glen Allen mortgage broker directory listings. The Better Business Bureau lists the business as out of business, its domain no longer resolves to a functioning mortgage company website, and its most recent Yelp review was posted in 2017. Buyers who encounter the name should verify current licensing status through NMLS Consumer Access before making contact.
Frequently Asked Questions
Is a VA loan always cheaper than conventional?
No. VA financing often wins on cash-to-close and lack of PMI, but the funding fee, interest rate, down payment, and planned ownership period can make conventional financing more attractive for some buyers.
Can I use a VA loan with a 580 credit score?
Possibly. VA does not publish one universal score floor, but many broker channels evaluate scores around 580 to 620 along with debt ratio, payment history, income, and residual income.
Does a VA loan require a down payment in Virginia?
Eligible borrowers may purchase with zero down when the loan amount and property qualify. A down payment can still help reduce the funding fee or strengthen an offer.
Do conventional loans require 20% down?
No. Eligible buyers may qualify with as little as 3% down, although PMI is usually required below 20% down.
What is the VA funding fee on a $400,000 loan?
At a 2.15% first-use rate with less than 5% down, the funding fee is $8,600. Eligible exempt borrowers do not pay it.
Can I get a soft pull mortgage broker prequalification?
Yes. A soft credit review can help estimate buying power and program fit without immediately creating a hard inquiry.
Can VA financing be used for an investment property?
No. VA financing is intended for a primary residence. Investors may need conventional investment, DSCR, or non-QM financing instead.
How much should I budget for closing costs?
A reasonable starting estimate is 2% to 5% of the purchase price, plus your down payment if applicable. The exact figure depends on the property, insurance, prepaid items, and negotiated credits.
Legal disclaimer: This article is for general educational purposes only and is not a commitment to provide financing. Rates, payments, program terms, eligibility, credit standards, funding fees, closing costs, and property requirements can change and are subject to approval. Equal Housing Opportunity.
The right choice is the one that protects your monthly budget and your cash position while fitting the home you want to buy. Start with a soft-pull review, compare the complete numbers, and make the offer with clear communication and fast approvals behind it.
Duane Buziak | Mortgage Maestro | NMLS #1110647 | Coast2Coast Mortgage, LLC NMLS #376205 | Licensed in VA, FL, TN, GA & DC [Contact] | NoTouch Credit Pull available — no hard inquiry, no credit hit.
