Part of our VA Home Loan Guide for Oahu & Hawaii series.
If you're eligible for a VA loan in Hawaii, you might be wondering whether it's actually the best option — or if a conventional or FHA loan makes more sense. The short answer for most veterans and service members on Oahu: the VA loan wins by a wide margin.
Here's a detailed comparison so you can see exactly why.
Quick Comparison: VA vs. Conventional vs. FHA
| Feature | VA Loan | Conventional | FHA |
|---|---|---|---|
| Down Payment | $0 (0%) | 3–20% | 3.5% |
| Mortgage Insurance | None | PMI until 20% equity | MIP for life of loan |
| Funding/Upfront Fee | VA funding fee (1.25–3.3%) | None | 1.75% upfront MIP |
| Credit Score Minimum | No VA minimum (lenders typically 580–620) | 620–680+ | 580 (3.5% down) or 500 (10% down) |
| Loan Limit (Full Entitlement) | No limit | $1,149,825 (Honolulu) | $1,149,825 (Honolulu) |
| Interest Rates | Typically lowest | Moderate | Low–moderate |
| Seller Concessions | Up to 4% | 3–9% (varies by down payment) | Up to 6% |
| Property Types | Primary residence only | Primary, second home, investment | Primary residence only |
Down Payment: The Biggest Advantage
On Oahu, where the median single-family home price exceeds $1 million, the down payment difference is massive:
- VA loan: $0 down on a $900,000 home
- Conventional (5% down): $45,000
- FHA (3.5% down): $31,500
That's tens of thousands of dollars you keep in your pocket — money you can use for moving costs, renovations, or an emergency fund after closing.
Mortgage Insurance: Where VA Saves You Monthly
This is where the VA loan really separates itself from both conventional and FHA loans.
VA Loan
No monthly mortgage insurance — ever. The VA funding fee replaces PMI/MIP entirely, and it can be rolled into the loan amount. Veterans with service-connected disabilities are exempt from the funding fee altogether.
Conventional Loan
If you put less than 20% down, you'll pay Private Mortgage Insurance (PMI). On a $800,000 loan, PMI can run $300–$600+ per month. It drops off once you reach 20% equity.
FHA Loan
FHA loans require both an upfront mortgage insurance premium (1.75% of the loan) AND monthly mortgage insurance premiums (0.55% annually) for the entire life of the loan. On a $800,000 loan, that's roughly $367/month forever — unless you refinance out of FHA.
Interest Rates
VA loans consistently offer lower interest rates than both conventional and FHA loans. Because the VA guarantees a portion of the loan, lenders take on less risk and pass those savings to borrowers.
Even a 0.25% rate difference on a $800,000 loan saves you roughly $125/month — or over $45,000 over 30 years.
Credit Score Requirements
The VA doesn't set a minimum credit score, though most lenders require at least 580–620. This is significantly more flexible than conventional loans, which typically require 680+ for the best rates.
FHA loans are also flexible at 580, but the lifetime MIP makes them more expensive long-term.
Property Restrictions
One area where VA and FHA loans have limitations: both are for primary residences only. If you're looking to buy an investment property or second home, you'll need a conventional loan.
However, you can buy a multi-unit property (up to 4 units) with a VA loan as long as you live in one unit. This is a powerful strategy for building rental income on Oahu. Learn more in our guide on Buying Multi-Family Property with a VA Loan in Hawaii.
Condo Considerations on Oahu
If you're buying a condo, VA loans require the project to be on the VA-approved condo list. Not all Oahu condos qualify. FHA has a similar requirement. Conventional loans have the fewest condo restrictions.
Check our guide on VA-Approved Condos on Oahu for a current list and tips.
When a Conventional Loan Might Make Sense
While the VA loan is usually the best choice, a conventional loan may be better if:
- You have 20%+ down payment saved and want to avoid the VA funding fee
- You're buying a second home or investment property
- The condo you want isn't VA-approved
- You want to preserve your VA entitlement for a future purchase
When FHA Might Make Sense
FHA loans rarely beat VA loans for eligible borrowers. The only scenario where FHA might be worth considering:
- You have limited VA entitlement remaining and need a lower down payment option
- The property is an FHA-approved condo that isn't on the VA list
Even then, the lifetime MIP on FHA loans makes them significantly more expensive over time.
Real Cost Comparison: $800,000 Home on Oahu
| Cost | VA Loan | Conventional (5% down) | FHA (3.5% down) |
|---|---|---|---|
| Down Payment | $0 | $40,000 | $28,000 |
| Upfront Fee | $18,200 (funding fee, can be financed) | $0 | $13,510 (upfront MIP) |
| Monthly MI/PMI | $0 | ~$400/mo (until 20% equity) | ~$354/mo (life of loan) |
| Est. Monthly Payment | ~$5,350 | ~$5,490 | ~$5,620 |
*Estimates based on 6.5% interest rate. Actual rates vary by lender and borrower profile.
The Bottom Line for Hawaii Buyers
If you qualify for a VA loan, it's almost always the best mortgage option for buying on Oahu. The combination of $0 down, no monthly mortgage insurance, and lower interest rates creates savings that add up to tens of thousands of dollars over the life of your loan.
Not sure if you're eligible? Start with our guide on Who Qualifies for a VA Loan in Hawaii, or reach out to us directly.
- Phone/Text: (808) 670-1548
- Email: info@youroahuhome.com
← Back to VA Home Loan Guide Hub
RELATED GUIDES
- Who Qualifies for a VA Loan in Hawaii?
- VA Loan Entitlement Explained — Full vs. Partial
- VA Loan Funding Fee — What You'll Pay in Hawaii
- VA Loan Closing Costs in Hawaii
- VA Home Loan Guide Hub
Kristy & Austin Nakamura
RB-24579 & RS-87802
(808) 670-1548
info@youroahuhome.com