VA loans are the most flexible loan in the market for borrowers who qualify. Zero down, no PMI, relaxed DTI limits, and assumable by a future buyer. The one catch is the funding fee — a one-time charge to the VA that replaces PMI and keeps the program self-sustaining.
Worked example: $425,000 home, zero down, first-use, 2.15% funding fee = $9,137 financed into the loan. New loan $434,137 at 6.5% on 30-year = $2,744/mo P&I. Add $425 property tax and $125 insurance = $3,294/mo PITI. No PMI, ever.
Funding fee schedule for 2026
The fee depends on down payment and whether this is your first VA loan:
- First use, 0% down: 2.15%
- First use, 5-9% down: 1.5%
- First use, 10%+ down: 1.25%
- Subsequent use, 0% down: 3.3%
- Subsequent use, 5-9% down: 1.5%
- Subsequent use, 10%+ down: 1.25%
- Disabled veterans, surviving spouses, Purple Heart recipients: exempt
Why VA beats conventional for most eligible borrowers
- No down payment required. Keep your emergency fund intact.
- No PMI. A $400K conventional loan at 5% down carries $200+/mo in PMI — VA carries zero.
- Assumable. When you sell, a buyer can take over your 3% VA loan from 2021. In a high-rate environment, this is a massive marketing advantage.
- Relaxed DTI. VA uses residual income, not a strict DTI cap. Many VA loans close with back-end DTI over 50%.
- No loan limit with full entitlement. If you have never had a VA loan default, there is no upper price cap — you can go jumbo VA with zero down in many markets.
When conventional might beat VA
The one scenario where conventional wins: you have 20%+ down and strong credit (760+). At 20% down you pay no PMI on conventional either, and you save the VA funding fee. For a $400K home with $80K down, conventional avoids a $6,400 fee. That is the only clear case.
VA appraisal gotchas
VA appraisers check for Minimum Property Requirements: peeling paint on pre-1978 homes (lead), roof condition, functional systems, no active termite damage. Sellers sometimes refuse VA offers on homes they know will flag. Work with an agent who understands VA MPRs before you write offers.