VA vs FHA vs Conventional: Which Loan is Right for San Diego Military Buyers?

The quick answer

For 90% of eligible military buyers in San Diego, the VA home loan is the best option — full stop. Zero down, no PMI, competitive rates, and assumable. But the remaining 10% of cases are worth understanding, because getting it wrong on a $700K San Diego home can cost tens of thousands of dollars.

Here's the short decision tree:

• You have full VA entitlement and plan to live in the home as your primary residence? → VA loan, almost always
• You're buying a second home while keeping your first VA-loan home? → Usually conventional or a second VA loan (depends on entitlement)
• You don't qualify for VA (e.g., short service, spouse without SBP, Guard/Reserve under 6 years)? → FHA or conventional
• You have 20%+ for a down payment and strong credit? → Conventional can sometimes beat VA on long-term cost
• You have bad credit (under 620) and little savings? → FHA becomes competitive

Side-by-side comparison

Rates and limits illustrative. Verify current numbers with a lender.

When the VA loan wins (almost every time)

On a typical San Diego purchase — let's say $700,000 with a qualified E-6 or O-2 buyer — the VA loan math is essentially unbeatable:

• Conventional (5% down): $35,000 down payment + ~$400/month PMI until you hit 20% equity (roughly 6–8 years)
• FHA (3.5% down): $24,500 down payment + $12,250 upfront MIP rolled into loan + ~$500/month MIP for the life of the loan
• VA (0% down): $0 down + $15,050 funding fee rolled into loan + $0 monthly mortgage insurance

Over a typical 5-year ownership window, the VA loan saves the average San Diego military buyer roughly $45,000–$65,000 compared to FHA and $30,000–$50,000 compared to conventional at similar down payment levels.

When FHA might actually beat VA

You have no VA entitlement available

If you've maxed out your VA entitlement on a previous loan and aren't ready to sell or refinance, FHA becomes a strong option — especially for second-home purchases where a large down payment isn't feasible. FHA's 3.5% down beats waiting to restore VA entitlement if you're time-pressured.

Your credit score is below 580

Most VA lenders require 580–620 minimum. FHA has a codified 500 minimum (with 10% down) or 580 (with 3.5% down). If your score is in the 540–580 range, FHA may be your only realistic path while you rebuild credit.

The property fails VA Minimum Property Requirements (MPRs)

VA MPRs are stricter than FHA standards on some items — flaking paint on pre-1978 homes, missing handrails, active water damage. If you love a fixer-upper that won't pass VA MPR, an FHA 203(k) rehab loan can finance the repairs. VA has a similar program but it's less commonly used.

When conventional might beat VA

You're buying a second or vacation home

VA loans are primary residence only. If you're keeping your current VA-financed home as a rental when you PCS out, a conventional loan on the new property is often the cleanest solution.

You're buying an investment property

VA loans can't finance pure investment property (unless you occupy one unit of a 2–4 unit building). For single-family rentals, conventional is the only option.

You have 20% down and excellent credit

If you're putting 20% down on a conventional loan, you skip PMI entirely. The conventional rate may be slightly higher than VA, but with no funding fee and no PMI, the long-term math sometimes favors conventional — especially for higher-credit borrowers planning to hold the home for 10+ years. This is rare for active-duty buyers (who usually don't have $140K sitting around for a $700K purchase) but common for retiring military with savings.

The San Diego-specific wrinkle: loan limits

San Diego County is a federally designated high-cost area. The 2026 conforming loan limit for single-family homes in San Diego County is approximately $1,209,750. That matters for:

• VA buyers with partial entitlement: Above the limit, down payment is required on the over-limit portion
• FHA buyers: The FHA limit for San Diego is approximately $1,077,550 — anything above requires jumbo financing
• Conventional buyers: Loans above $1,209,750 are "jumbo" with stricter credit and reserve requirements

For VA buyers with full entitlement, there is no VA loan limit — you can finance a $1.5M home with $0 down if you qualify by income. This is a San Diego-specific advantage that's often misunderstood.

Real scenarios: which loan wins for which buyer

Scenario 1: E-5 with dependents, PCSing to NBSD

Profile: First-time buyer, $3,987 BAH, $5,500 total military income, 710 credit, $12K savings. Looking at $600K in Chula Vista.
Answer: VA loan. Zero down preserves the $12K for moving costs and reserves. No PMI. Funding fee at 2.15% ($12,900) is financed into the loan. Nothing else comes close.

Scenario 2: O-3 selling a previous VA-loan home

Profile: Previous VA loan on Norfolk home being sold at closing. PCSing to Miramar. $720K purchase target. 780 credit. $80K savings.
Answer: VA loan with restored entitlement, once Norfolk sale closes. If timing requires purchasing before the Norfolk sale, consider bridging with conventional and refinancing to VA after entitlement is restored.

Scenario 3: Retiring E-8 buying a forever home in Carlsbad

Profile: Retirement pay + VA disability + working spouse. $180K savings. 760 credit. $900K purchase target. Disability exemption on funding fee.
Answer: VA loan remains strongest — funding fee exempt, no PMI, $0 down preserves retirement reserves. Conventional with 20% down ($180K) is competitive only if rates on VA vs. conventional have narrowed significantly.

Scenario 4: Marine buying investment property after PCS

Profile: Keeping current Oceanside home as rental. Buying new primary residence in Virginia Beach.
Answer: Second VA loan is possible with remaining entitlement, but depends on entitlement math. Conventional is often cleaner. This requires a specific entitlement review with a VA lender.