Four Differences, and This Year a Fifth One That Argues the Other Way
Program and regulatory figures verified October 10, 2026. Details change; confirm your scenario with us.
We write both, so this is a comparison and not a pitch. In Kentucky this year the honest version has a genuine argument on each side.
★ Side by side
| Feature | VA | Conventional |
|---|---|---|
| Minimum down payment | ★★ None with full entitlement | Typically required |
| Monthly mortgage insurance | ★ None | Usually until equity is reached |
| Upfront fee | 2.15% to 3.3%, or 0 if exempt | No comparable VA-style fee |
| Loan limit | ★★ "No loan limit" with full entitlement | Conforming limits apply |
| Residual income test | ★ Yes | ★ No equivalent |
| ★★ Equity at closing | ★★★ none, if zero down | ★ whatever you put down |
| Occupancy | Principal dwelling rules apply | Investment property permitted |
★★ The deposit, and the sentence that qualifies it
The VA: with full entitlement you have "no loan limit (as long as you can afford the loan amount and the property appraisal supports the purchase price of the home)", and "your lender will still need to approve you for a loan." ★★ The guaranty is uncapped; the underwriting is not. Which entitlement you have.
★ The fee is where the comparison is closest
- ★★ If you are fee-exempt, a compensable service-connected rating, retirement pay in lieu, DIC, a memorandum rating before closing, or active duty with a Purple Heart, the fee is not charged, and a zero-fee, no-deposit loan with no mortgage insurance has no conventional analogue. The five exemptions
- ★ If you are paying 3.3% on subsequent use and have a real deposit available, conventional deserves a serious look.
★ The test only one side has
VA underwriting asks what is left in the household each month after the payment, taxes, insurance, utilities, maintenance, debts and withholding, against a threshold by household size and region. Conventional looks at ratios. ★ The two can disagree in both directions. How it works, and why Kentucky pulls both ways.
★★★ And the Kentucky-specific argument that runs the other way this year
On the Ohio and Missouri sites in this round, the fourth difference is a state tax one. In Kentucky the decisive extra factor is the market.
★★★ 13 of 20 Kentucky metros fell over the year to August 2026, second worst in the nation. A VA borrower at zero down has no equity to absorb that. A conventional borrower with a deposit does. The full picture.
★★ So the honest framing in Kentucky right now:
- ★★ Staying five or ten years? The VA loan's advantages dominate and a soft market is a good time to buy. Use the benefit.
- ★★ Moving in two or three? The absence of a deposit stops being purely an advantage. Consider putting 5% down anyway. It halves a subsequent-use fee and buys the cushion. The threshold
- ★ Fee-exempt and staying? Nothing conventional comes close.
★★ What the state does not contribute to this decision
Unusually little. Kentucky's homestead exemption turns on age 65 or total disability and is identical whichever loan you choose, so it does not tilt the comparison at all. In Ohio a disabled veteran's exemption effectively lowers the payment; here it only does so for a narrower group. Who that is.
★ Where conventional genuinely wins
- Investment property. VA occupancy rules require a principal dwelling.
- A second simultaneous purchase can run into remaining-entitlement arithmetic. The 25% guaranty rule
- ★★ A short expected hold in a falling metro, where a deposit is protection rather than a cost.
We write both. Bring the actual numbers and we will tell you which is cheaper for you. We publish no rates and no payment figures anywhere on this site.
Mike Certo, NMLS #260555. (480) 296-6513 · mcerto@cfmtg.com.
Frequently asked questions
Is a VA loan better than conventional in Kentucky?
It depends on how long you intend to stay and whether you are funding-fee exempt. For a buyer staying five or ten years, especially a fee-exempt one, the VA loan's no-deposit, no-mortgage-insurance structure has no conventional equivalent. For a buyer expecting to move within two or three years in a market that fell, a deposit is protection rather than a cost.Does a falling market change the VA versus conventional decision?
Yes, specifically because a VA borrower with full entitlement puts nothing down and so has no equity cushion. Thirteen of Kentucky's twenty metros declined over the year to August 2026, which makes the absence of a deposit a real consideration for a short expected hold.Do VA loans have mortgage insurance?
No. VA loans carry no monthly mortgage insurance. They carry a one-time funding fee instead, from 2.15 percent on first use to 3.3 percent on subsequent use with less than 5 percent down, and nothing at all for an exempt borrower.Does Kentucky state law affect the VA versus conventional choice?
Barely. Kentucky's homestead exemption turns on age sixty-five or classification as totally disabled and is identical whichever loan you choose, so it does not tilt the comparison.Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about VA home loan financing, not a loan commitment and not legal, tax or financial advice. Cornerstone First Mortgage is a private lender and is not affiliated with, endorsed by or acting on behalf of the U.S. Department of Veterans Affairs or any government agency. VA entitlement, funding-fee exemption and disability ratings are determined by the U.S. Department of Veterans Affairs. Kentucky's homestead exemption is established by section 170 of the Constitution of Kentucky and KRS 132.810 and is administered by county Property Valuation Administrators, not by Cornerstone; the amount is reset every two years by the Kentucky Department of Revenue and the tax effect depends on local rates. Housing market figures describe the twelve months to August 2026 and are not a forecast. Figures here carry the date we verified them against primary sources. All loans are subject to borrower, property and program qualification.