Reviewed methodology
How this page is reviewed
See methodology, assumptions & sources
| Risk tier | YMYL |
|---|---|
| Author | Calculover Editorial Team Finance education |
| Editorial owner | Calculover Loans & Housing Desk Mortgage methodology owner |
| Reviewer | Calculover Editorial Review Source and limitation review |
| Last reviewed | 2026-05-14 |
| Last verified | 2026-05-14 |
| Data effective date | 2026-05-14 |
Methodology
VA vs FHA vs Conventional compares program eligibility, down payment, mortgage insurance, funding fee, and total cash-to-close across the three loan programs using current published agency rules and user-entered borrower profile (service status, credit score, down payment, purchase price).
Assumptions
- Program rules reflect current VA, FHA, and conventional (Fannie Mae / Freddie Mac) published guidelines.
- Borrower profile (eligibility, credit, debt-to-income) is user-supplied and not independently verified.
- PMI, MIP, and VA funding-fee schedules are pulled from the agency tables linked under sources.
Limitations
- This page does not approve a loan, predict program rule changes, or quote a specific lender's overlays.
- Lender-specific credit-tier pricing, county-loan-limit changes, and program rule updates can materially affect eligibility and cost.
Sources
- VA Home Loans, U.S. Department of Veterans Affairs
- FHA Single Family Housing Policy Handbook, U.S. Department of Housing and Urban Development
- Conforming Loan Limits, Federal Housing Finance Agency
Professional guidance: This page is for mortgage-program education only and is not mortgage, legal, tax, or underwriting advice. Confirm program eligibility, fees, and loan limits with a VA-, FHA-, or conventional-approved lender.
The Three Mortgage Frameworks Compared
Each of the three major residential mortgage programs serves a distinct economic profile:
The Core Program Frameworks
- VA Mortgage (Department of Veterans Affairs): Exclusively for qualifying military service members. Requires 0% down payment and charges 0% monthly mortgage insurance. Compensated by a one-time upfront funding fee (waived for disabled veterans).
- FHA Mortgage (Federal Housing Administration): Government-insured loan for borrowers with lower credit (580+) or high DTIs. Requires 3.5% down, 1.75% upfront MIP, and permanent 0.55% annual MIP.
- Conventional Mortgage (Fannie Mae / Freddie Mac): Private conforming financing. Requires 3%–20% down, zero upfront insurance fees, and monthly PMI that cancels automatically at 80% LTV.
Worked Numeric Modeling: $400,000 Purchase Comparison
Consider a buyer purchasing a $400,000 home across all three programs:
- Option 1 — VA Loan (0% Down, 2.15% Funding Fee, 6.35% Interest Rate):
• Starting Loan Balance:$400,000 + $8,600 (fee financed) = $408,600.00
• Monthly P&I (6.35%):$2,541.30/month
• Monthly Mortgage Insurance:$0.00/month
• Total Monthly Outlay:$2,541.30/month
• 5-Year Cumulative Payments:60 × $2,541.30 =$152,478.00 - Option 2 — FHA Loan (3.5% Down / $14,000, 1.75% UFMIP, 6.50% Interest Rate):
• Starting Loan Balance:$386,000 + $6,755 (UFMIP financed) = $392,755.00
• Monthly P&I (6.50%):$2,482.47/month
• Monthly MIP (0.55%):$176.92/month
• Total Monthly Outlay:$2,659.39/month
• 5-Year Cumulative Payments:$159,563.40 + $14,000 down =$173,563.40 - Option 3 — Conventional Loan (5% Down / $20,000, 6.75% Interest Rate, 740 Credit):
• Starting Loan Balance:$380,000.00($0 upfront fee)
• Monthly P&I (6.75%):$2,464.58/month
• Monthly PMI (0.45%):$142.50/month
• Total Monthly Outlay:$2,607.08/month
• 5-Year Cumulative Payments:$156,424.80 + $20,000 down =$176,424.80 - The Financial Verdict:
• The VA loan saves over $21,000 to $24,000 in upfront cash on Day 1 while delivering the lowest monthly payment ($2,541/mo).
• For non-veterans, Conventional saves thousands over FHA by avoiding permanent monthly mortgage insurance.
Visualizing 5-Year Total Cost of Ownership
The visual below contrasts the upfront down payment plus 5-year cumulative mortgage payments across all three programs:
5-Year Total Cash Outlay: VA vs. FHA vs. Conventional ($400k Home)
Comparing Upfront Down Payment + 60 Months of Total Mortgage Payments.
| Loan Program | Down Payment | Upfront Fee | Monthly Payment (P&I + Ins) | 5-Year Total Outlay |
|---|---|---|---|---|
| VA Loan (0% Down) | $0.00 | $8,600 (Financed) | $2,541.30/month | $152,478.00 |
| FHA Loan (3.5% Down) | $14,000.00 | $6,755 (Financed) | $2,659.39/month | $173,563.40 |
| Conventional (5% Down) | $20,000.00 | $0.00 | $2,607.08/month | $176,424.80 |
Figure 1: The VA loan requires $0 down and $0 monthly PMI, saving over $21,000 in 5-year cash outlays compared to FHA and Conventional loans.
VA Funding Fee Waivers & Service-Connected Disability
The VA funding fee is waived by law for the following qualifying categories:
- Service-Connected Disability: Veterans receiving VA disability compensation (even a 10% rating) pay $0 in funding fees, instantly saving $8,600+ on a $400k home.
- Purple Heart Recipients: Active duty service members awarded the Purple Heart are exempt from the funding fee.
- Surviving Spouses: Eligible surviving spouses of service members who died in service or from a service-connected disability are 100% fee-exempt.
5 Critical Mistakes When Choosing a Mortgage Program
- Eligible Veterans Choosing FHA or Conventional: Failing to use VA eligibility and paying unnecessary down payments and monthly PMI.
- Assuming Conventional Requires 20% Down: First-time buyers choosing FHA unaware that conventional HomeReady/Home Possible allows 3.0% down with cancellable PMI.
- Ignoring VA Loan Entitlement Rules: Assuming you can only use a VA loan once in your lifetime (bonus entitlement allows multiple concurrent VA loans).
- Staying in FHA Loans After Reaching 20% Equity: Paying permanent FHA MIP for years after market appreciation qualifies you for a no-PMI conventional refinance.
- Forgetting About VA Minimum Property Requirements: Entering contract on severe fixer-uppers that will fail strict VA safety inspections.
In-Depth Mortgage & Loan Comparison Guides
To master government loan underwriting standards and down payment mechanics, explore our research resources:
- VA Loan vs Conventional: Complete Benefits, Fees & Rate Analysis — Full breakdown of entitlement math, funding fees, and seller concession rules.
- How to Calculate Mortgage Payments: Principal, Interest, Taxes & PMI — Understand full PITI mathematical breakdowns.
Recommended Mortgage Calculators
Primary Sources & Citations
- U.S. Department of Veterans Affairs. (2025). VA Lenders Handbook (M26-1: Guaranteed Loan Processing Manual). Loan Guaranty Service.
- U.S. Department of Housing and Urban Development (HUD). (2025). Single Family Housing Policy Handbook (HUD Handbook 4000.1).
- Federal National Mortgage Association (Fannie Mae). (2026). Selling Guide: Section B2-1.2, Conforming Mortgage Product Types.
- Consumer Financial Protection Bureau (CFPB). (2025). Comparing Loan Types: Conventional, FHA, and VA Options.