VA Loan vs Conventional in Arizona

Q: Not sure whether VA or conventional fits your Arizona purchase?

Send Mike your numbers and he'll run both side by side for your situation. No obligation, no script. You'll get a straight answer on which loan saves you more, based on your down payment, credit, and goals. By providing your phone number and submitting this form, you authorize Cornerstone First Mortgage (NMLS #173855) to send informational and marketing text messages to the mobile number provided, sometimes using automated technology. Consent is not a condition of obtaining a loan. Message and data rates may apply. Message frequency may vary. Text STOP to opt out at any time, or HELP for additional assistance. See our Privacy Policy and Terms of Use .

Q: Is a VA loan or conventional loan better in Arizona?

For most Arizona Veterans, VA is better: $0 down at any price with full entitlement versus 3% to 20% down on conventional, and no monthly PMI versus PMI required below 20% down. Conventional only edges ahead for a second home or investment property, or for a Veteran with 740+ credit and 20%+ cash and no disability rating.

Q: VA funding fee vs conventional PMI — which costs less?

The VA funding fee is a one-time 2.15% on first use (financeable into the loan) and is waived entirely at a 10%+ service-connected disability rating. Conventional has no funding fee, but PMI is an ongoing monthly cost when you put down less than 20%, running until you reach 20% equity. Over a few years, PMI often costs more than VA's one-time fee.

Q: Do VA loans require mortgage insurance like conventional loans do?

No. VA loans never carry monthly mortgage insurance, no matter how little you put down. Conventional loans require PMI any time your down payment is under 20%, and it stays on the loan until you reach roughly 20% equity (78% LTV). That missing monthly PMI is one of the biggest cash-flow advantages VA gives Arizona Veterans.

Q: Are VA loans assumable and conventional loans not?

Yes. A VA loan can be assumed by a qualified buyer, who takes over your existing loan and its terms. Conventional loans are generally not assumable. In a higher-rate market, an assumable VA loan can become a strong selling point when you list your Arizona home, since the buyer may inherit better terms than they'd get on a new loan.

Q: What is the VA residual-income test and how does it differ from conventional?

Residual income is the cash you have left each month after your mortgage, debts, taxes, and basic living costs. It's the VA's top underwriting factor, ranking above debt-to-income ratio. Because of it, you can often qualify for a VA loan with a higher DTI than the 45% to 50% conventional usually allows, as long as your leftover monthly cash clears the VA's regional threshold.

Q: Which loan is more flexible on credit score, VA or conventional?

VA is more credit-flexible. The VA sets no minimum credit score, and most lenders look for roughly 580 to 620. Conventional generally needs a 620 floor, with the best pricing reserved for 740+ scores. If your credit sits in the low-to-mid 600s, VA usually gives you better terms and an easier approval in Arizona. Related: VA vs FHA in Arizona · VA vs USDA in Arizona · Resources hub Arizona VA loan specialist for active-duty, retired, and surviving spouse Veterans across Luke AFB, Davis-Monthan, MCAS Yuma, and Fort Huachuca. Equal Housing Lender

By Mike Certo, Cornerstone First Mortgage · NMLS #260555 · Updated June 20, 2026

For Arizona Veterans, the VA vs conventional decision usually favors VA, but conventional has some specific advantages worth knowing.

Key Takeaways

VA wins for most Arizona Veterans on cash: $0 down at any price with full entitlement versus 3% to 20% down on conventional, and no monthly PMI versus PMI required below 20% down.
VA loans are assumable by a qualified buyer; conventional loans are not. In a higher-rate market, an assumable VA loan can be a real selling advantage when you go to sell your Arizona home.
The VA's first-use funding fee is 2.15% (one-time, financeable) and is waived entirely at a 10%+ service-connected disability rating. Conventional has no funding fee, but PMI is an ongoing monthly cost until you reach 20% equity.
VA underwriting weighs residual income (cash left after bills) as its top factor, so you can qualify with a higher debt-to-income ratio than the 45% to 50% conventional typically allows.
VA sets no minimum credit score (most lenders want 580 to 620), while conventional generally needs a 620 floor with best pricing at 740+, making VA the more credit-flexible path.

Side-by-side comparison

Factor	VA Loan	Conventional Loan
Minimum down payment	$0	3% (first-time buyers); 5% standard
Upfront fee	2.15% funding fee (waived for VA-exempt status)	None
Monthly mortgage insurance	NONE	PMI required <20% down (drops at 78% LTV)
Minimum credit score	No VA min; lender overlay typically 580-620	620 floor; best pricing at 740+
2026 AZ loan limit	$832,750 baseline (jumbo with full entitlement)	$832,750 baseline (jumbo via different programs)
DTI limits	41% guideline; higher OK with strong residual	45% typical; up to 50% with strong reserves
Cash-out refi limit	100% LTV	80% LTV
Primary residence required	Yes	Yes (for owner-occupied; investor + second-home conventional available)
Property types	Primary residence only	Primary, second home, investment all available

When VA wins (most AZ Veterans)

✓ Any disability rating: funding fee waived
✓ Limited down payment savings: VA's $0 down is decisive
✓ Credit 620-680: VA is more lenient on pricing
✓ Want maximum cash-out flexibility (100% LTV)

When conventional actually wins

Buying a second home or investment property

VA loans require primary residence. If you're buying a vacation home or rental property, you NEED conventional financing. There's no VA option for these.

Credit score 740+ with 20% down savings available

At 740+ FICO with 20% down, conventional pricing is often a step better than VA. Combined with no funding fee, the total cost can be lower than VA for Veterans with strong credit and significant savings.

Avoiding the funding fee on a first-use VA loan WITHOUT disability rating

On a $475K loan, the first-use funding fee is $10,213. If you go conventional with 20% down ($95K), there's no PMI and no funding fee. For high-income Veterans with savings to spare, conventional can be cleaner.

Single-close VA construction is limited

Most AZ VA construction lenders charge a pricing add-on for single-close VA construction. Conventional construction-to-permanent financing has more lender options + competitive pricing.

Jumbo above $832,750 with strong credit + cash for 10%+ down

VA jumbo above $832,750 is available with full entitlement and $0 down. For ultra-high-end purchases with strong credit and cash for 10%+ down, conventional jumbo can sometimes price more favorably.

Real example — $475K AZ home

For an AZ Veteran with no disability rating, 720 FICO, $50K savings available for down payment:

VA Loan

Down payment: $0
Funding fee (first use, 5-9.99% down isn't applicable since $0 down): 2.15% = $10,213 financed
Total loan: $485,213
Monthly P&I (rate-dependent, get your custom rate quote →): $3,066
Total monthly: $3,066

Conventional (10% down)

Down payment: $47,500
Loan amount: $427,500
Monthly P&I (rate-dependent, get your custom rate quote →): $2,737
PMI (until 78% LTV, about 9 years): ~$215/mo
Monthly all-in: $2,952 for ~9 years, then $2,737 after PMI drops

VA wins on monthly cash flow ($3,066 vs $2,952 only $114 different but requires $47,500 less cash at closing). VA's $0-down advantage is decisive for cash-flow-constrained buyers.

If the same Veteran has $95K available for 20% down on conventional:

Conventional (20% down)

Down payment: $95,000
Loan amount: $380,000
Monthly P&I (rate-dependent, get your custom rate quote →): $2,434
PMI: NONE
Total monthly: $2,434

Conventional wins on monthly cash flow by $632, but ties up $95K vs VA's $0. The choice depends on whether the buyer values lower monthly payment or preserved cash.

How disability rating changes the math

For ANY level of disability rating (10%+), the funding fee is waived. This removes one of VA's main "costs" relative to conventional and makes VA decisively the better choice in nearly all scenarios for disabled Veterans.

The "use VA now, refi to conventional later" play

If you're buying with VA but have plans for the home to appreciate significantly + want to avoid the funding fee burden long-term, you can refinance VA to conventional after building equity. This is rare but happens in fast-appreciating AZ markets.

More common play: use VA for $0-down + lower closing costs, then later refi VA-to-VA via IRRRL if the market improves.

How to decide for your situation

Quick decision matrix:

Your situation	Lean toward
Any VA disability rating	VA (funding fee waived)
Limited cash for down payment	VA
Buying a second home or investment	Conventional (required)
740+ FICO + 20%+ down available + no disability rating	Conventional (slightly lower cost)
Below 680 FICO	VA (better pricing flexibility)
Above $832,750 + 10%+ down + 740+ FICO	Conventional jumbo
First VA use + lower cash on hand	VA

Not sure whether VA or conventional fits your Arizona purchase?

Send Mike your numbers and he'll run both side by side for your situation. No obligation, no script. You'll get a straight answer on which loan saves you more, based on your down payment, credit, and goals.

Name Email Phone Your situation I consent to receive informational and marketing text messages. Consent is not a condition of obtaining a loan. Text STOP to opt out.

By providing your phone number and submitting this form, you authorize Cornerstone First Mortgage (NMLS #173855) to send informational and marketing text messages to the mobile number provided, sometimes using automated technology. Consent is not a condition of obtaining a loan. Message and data rates may apply. Message frequency may vary. Text STOP to opt out at any time, or HELP for additional assistance. See our Privacy Policy and Terms of Use.

Frequently asked questions

Is a VA loan or conventional loan better in Arizona?

For most Arizona Veterans, VA is better: $0 down at any price with full entitlement versus 3% to 20% down on conventional, and no monthly PMI versus PMI required below 20% down. Conventional only edges ahead for a second home or investment property, or for a Veteran with 740+ credit and 20%+ cash and no disability rating.

VA funding fee vs conventional PMI — which costs less?

The VA funding fee is a one-time 2.15% on first use (financeable into the loan) and is waived entirely at a 10%+ service-connected disability rating. Conventional has no funding fee, but PMI is an ongoing monthly cost when you put down less than 20%, running until you reach 20% equity. Over a few years, PMI often costs more than VA's one-time fee.

Do VA loans require mortgage insurance like conventional loans do?

No. VA loans never carry monthly mortgage insurance, no matter how little you put down. Conventional loans require PMI any time your down payment is under 20%, and it stays on the loan until you reach roughly 20% equity (78% LTV). That missing monthly PMI is one of the biggest cash-flow advantages VA gives Arizona Veterans.

Are VA loans assumable and conventional loans not?

Yes. A VA loan can be assumed by a qualified buyer, who takes over your existing loan and its terms. Conventional loans are generally not assumable. In a higher-rate market, an assumable VA loan can become a strong selling point when you list your Arizona home, since the buyer may inherit better terms than they'd get on a new loan.

What is the VA residual-income test and how does it differ from conventional?

Residual income is the cash you have left each month after your mortgage, debts, taxes, and basic living costs. It's the VA's top underwriting factor, ranking above debt-to-income ratio. Because of it, you can often qualify for a VA loan with a higher DTI than the 45% to 50% conventional usually allows, as long as your leftover monthly cash clears the VA's regional threshold.

Which loan is more flexible on credit score, VA or conventional?

VA is more credit-flexible. The VA sets no minimum credit score, and most lenders look for roughly 580 to 620. Conventional generally needs a 620 floor, with the best pricing reserved for 740+ scores. If your credit sits in the low-to-mid 600s, VA usually gives you better terms and an easier approval in Arizona.