What Are the Benefits of a VA Loan Compared to Other Loan Types?
No down payment for eligible borrowers, no monthly mortgage insurance and often a lower rate than a comparable conventional or FHA loan. The trade-off is a one-time funding fee, which many disabled veterans don't pay. VA also offers a streamlined refinance for existing VA loans. What it doesn't offer is a VA home equity line.
Last updated September 29, 2026How do down payment and mortgage insurance compare?
This is the biggest difference. A VA loan can have no down payment and never carries monthly mortgage insurance. Most borrowers pay a one-time funding fee instead, which can be rolled into the loan. FHA loans require a down payment and, with less than 10% down, carry mortgage insurance for the life of the loan. Conventional loans usually need some down payment and drop private mortgage insurance once you build enough equity. With the government guarantee behind them, VA loans are often priced below comparable conventional or FHA loans, though your rate depends on the lender, your credit and the market.
How does the funding fee affect the comparison?
It's the cost of skipping monthly mortgage insurance. Veterans receiving VA compensation for a service-connected disability are exempt. Everyone else pays a percentage of the loan, which eats into the advantage, especially at low down payments. Compare the rate, the fee and the monthly payment side by side with FHA and conventional quotes.
Can I get a second mortgage or HELOC through VA?
No. VA doesn't offer a home equity line or second mortgage. To take equity out of a VA-financed home, you can do a VA cash-out refinance, which replaces your first mortgage, or add a separate, non-VA second lien. In Texas, a VA cash-out refinance isn't allowed on a homestead; the state's Attorney General concluded in 2018 (Opinion KP-0183) that the VA guaranty conflicts with the state constitution's home equity rules.
How does the VA streamline refinance (IRRRL) work?
It lets you refinance an existing VA loan to a lower rate with less paperwork. VA itself doesn't require a new appraisal or credit underwriting, though lenders may. Going from one fixed rate to another, the rate has to drop at least half a percentage point, and the loan must be seasoned: at least 210 days after the first payment was due, with six monthly payments made.
It depends on your situation:
- You're buying with little cash saved: no down payment and no monthly mortgage insurance are the big advantages.
- You have a service-connected disability rating and receive compensation: you likely skip the funding fee.
- You want to tap equity and keep your first mortgage: VA doesn't offer that, so compare a VA cash-out with a separate second lien.
- You already have a VA loan and rates drop: an IRRRL may work once you meet the seasoning and rate-drop rules.
| Down payment | Can be 0% |
|---|---|
| Monthly mortgage insurance | None; one-time funding fee |
| Home equity line | Not offered by VA |
| Streamline refinance | IRRRL: 210 days and six payments; at least a 0.5-point drop, fixed to fixed |
Related questions
- what's the Difference Between an FHA Loan and a Conventional Loan
- does VA Disability Exempt You From the VA Funding Fee
- how Does the VA IRRRL Streamline Refinance Work, and What Are Its Requirements
- how Does VA Eligibility Affect Cash-Out Refinance LTV Limits and Funding Fees
- minimum credit score to qualify
Sources
- https://www.benefits.va.gov/homeloans/documents/docs/VA_Buyers_Guide.pdf
- https://news.va.gov/140795/va-home-loan-basics-benefit-unique-advantages
- https://news.va.gov/147050/funding-fee-who-pays-who-is-exempt
- https://www.va.gov/housing-assistance/home-loans/loan-types/cash-out-loan
- https://www.benefits.va.gov/HOMELOANS/documents/circulars/26_19_22.pdf
- https://www.ecfr.gov/current/title-38/chapter-I/part-36/subpart-B/section-36.4306
- https://www.va.gov/housing-assistance/home-loans/loan-types/interest-rate-reduction-loan
- https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2018/kp0183.pdf
- https://www.hud.gov/hud-partners/housing-mip
Sourced from licensed loan officers and brokers in the FreeRateUpdate network.
Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.