Compare
VA loan vs. conventional loan for Chicago buyers
Short answer
For most eligible buyers putting less than 20% down, a VA loan beats a conventional loan in Chicago. VA needs no down payment and never charges monthly mortgage insurance, while a conventional loan needs at least 3% down and charges private mortgage insurance (PMI) until you reach 20% equity. A conventional loan can win if you put 20% or more down and are not exempt from the VA funding fee.
Side by side
| VA loan | Conventional loan | |
|---|---|---|
| Minimum down payment | 0% | 3% for many first-time buyers, 5% typical |
| Upfront fee | Funding fee 2.15% first use (0% if disabled) | None |
| Monthly mortgage insurance | None | PMI until 20% equity; drops automatically at 22% |
| Cook County one-unit limit, 2026 | No limit with full entitlement | $832,750 |
| Typical minimum credit score | Set by lender, often 580 to 620 | 620 |
| Debt-to-income review | 41% benchmark plus residual income | Usually up to 45% to 50% |
| Seller concessions | 4% cap on concessions; closing-cost credits unlimited | 3% to 9% depending on down payment |
| Two- to four-flats | $0 down if you live in one unit | Usually 5% or more down |
| Second homes and investment property | Not allowed | Allowed |
When the VA loan wins
- You want to put less than 20% down. VA avoids PMI entirely.
- You receive VA disability compensation, so you pay no funding fee.
- Your credit score is under 680, where PMI on a conventional loan gets expensive.
- You are buying a two-flat or larger with little cash.
When a conventional loan can win
- You are putting 20% or more down and would otherwise pay the funding fee.
- You are buying a second home or investment property.
- You want to keep your VA entitlement free for a later purchase.
- The condo building is approved by Fannie Mae or Freddie Mac but not by VA.
Common questions
Is a VA loan better than a conventional loan?
For eligible buyers putting less than 20% down, usually yes: no down payment and no monthly mortgage insurance. With 20% down and no funding fee exemption, a conventional loan can cost less upfront.
Do VA loans have PMI?
No. VA loans never charge private mortgage insurance. Conventional loans charge PMI until you reach 20% equity.
Sources
What will your VA funding fee be?
Enter a price and down payment to see the 2026 fee, or check whether you are exempt.
An independent guide. Not affiliated with or endorsed by the U.S. Department of Veterans Affairs, and not a lender. General information, not legal, tax or financial advice.