VA Loan vs Conventional in Arizona

Mike Certo · May 30, 2026

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

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 10%+ disability)	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 rates are often 0.125-0.25% lower than VA. Combined with no funding fee, the total cost can be lower than VA for vets with strong credit + 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're conventional with 20% down ($95K), there's no PMI + no funding fee. For high-income vets 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, but rates typically run slightly above standard VA. For ultra-high-end purchases with strong credit + cash for 10%+ down, conventional jumbo can offer better rates.

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 — current quote available on request): $3,066
Total monthly: $3,066

Conventional (10% down)

Down payment: $47,500
Loan amount: $427,500
Monthly P&I (rate-dependent — current quote available on request): $2,737
PMI (until 78% LTV — ~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 vet has $95K available for 20% down on conventional:

Conventional (20% down)

Down payment: $95,000
Loan amount: $380,000
Monthly P&I (rate-dependent — current quote available on request): $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 vets.

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 when rates drop.

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