VA Loans in San Diego: True Cost vs. FHA

Key takeaways

• VA loans carry no monthly mortgage insurance. FHA loans do, and at San Diego price points the FHA premium runs for the life of the loan on a low down payment.
• On an $850,000 purchase, VA came out roughly $370/month cheaper than FHA in the worked example below, even while financing a larger loan.
• The one-time VA funding fee is 2.15% for a first-use purchase with less than 5% down. Veterans with a service-connected disability rating pay 0%.
• Full entitlement means no VA county loan limit. Partial entitlement brings the conforming limit back into play, which in San Diego County is $1,104,000.
• BAH counts as qualifying income, which is why a VA loan often qualifies a service member for more house than a civilian salary of the same size would.

Why the VA loan matters in San Diego specifically

Naval Base San Diego, Marine Corps Base Camp Pendleton, Marine Corps Air Station Miramar, Naval Base Coronado, and Naval Base Point Loma sit inside the county line. A large share of local buyers are VA-eligible, and local lenders, listing agents, and appraisers are genuinely fluent in VA financing.

The volume cuts both ways. Because VA loans are routine here, it is easy to accept a single loan officer's word on which program is cheapest without seeing the math. The programs price differently depending on your down payment, your entitlement status, and whether you are exempt from the funding fee, so the answer is not the same for every eligible buyer.

How the VA loan works

The headline feature is $0 down with full entitlement. Since 2020, there has been no VA county loan limit for a borrower with full entitlement remaining. You can borrow what a lender will approve and what an appraisal supports.

Unlike FHA and low-down-payment conventional loans, VA loans carry no monthly mortgage insurance premium at all. Instead, most borrowers pay a one-time funding fee, which is normally rolled into the loan rather than paid in cash at closing.

Other structural features worth knowing:

• Occupancy is required. The VA loan is for a primary residence. You generally must intend to occupy the home within 60 days of closing. A multi-unit property qualifies if you occupy one of the units.
• No prepayment penalty. You can pay the loan down or off early at any time.
• The loan is assumable. A qualified buyer, including a civilian, can take over your VA loan and its rate. In a higher-rate environment, an assumable low-rate loan is a real selling point, though the assumption can tie up your entitlement until it is restored.
• The VA appraisal includes Minimum Property Requirements (MPRs). The property must be safe, structurally sound, and sanitary. Older San Diego housing stock sometimes trips MPRs on peeling paint, roof condition, or a failed water heater strap.

VA funding fee tiers (2026)

Per the current VA funding fee schedule for a purchase loan:

Two details that save people money:

• Putting 5% down drops the first-use fee from 2.15% to 1.50%. On an $850,000 purchase that is a swing of roughly $5,500 in financed fee.
• If you receive a retroactive disability rating with an effective date before your closing date, you may be entitled to a refund of the funding fee you already paid.

VA vs. FHA vs. conventional: a worked comparison

Take an $850,000 San Diego purchase. It sits comfortably under the county's $1,104,000 conforming loan limit, so all three programs apply cleanly. The figures below use each program's own rules and this site's fallback rate assumptions (conventional 6.50%, FHA 6.25%, VA 6.15%). A live quote from your own lender will differ.

A few notes on how those land:

• VA. No monthly mortgage insurance at any down payment. The funding fee is financed, so the loan balance is larger than the purchase price, and the payment still comes in under FHA.
• FHA. The upfront Mortgage Insurance Premium (MIP) is financed, but the annual MIP is the expensive part. At this loan size the loan crosses FHA's $726,200 high-balance threshold with a loan-to-value ratio above 95%, which lands on the 0.75% annual MIP tier, about $522/month. At a 3.5% down payment, FHA MIP runs for the life of the loan.
• Conventional. The lowest payment of the three, but only because of the much larger cash requirement. $170,000 up front is the trade.

The useful comparison for most eligible buyers is VA against FHA, since both allow a low down payment. In this example VA comes out roughly $370/month cheaper than FHA, about $4,440 a year, despite financing a larger loan. FHA's ongoing mortgage insurance outweighs the difference in loan size.

Conventional wins on monthly payment only if you have 20% down sitting in cash. If you have that much liquidity, the real question is whether $170,000 is better deployed as a down payment or kept invested, which is a personal-finance question rather than a loan-program question.

These are illustrative estimates built from public program rules and this site's fallback rates, not a lender quote. Your actual rate, closing costs, and entitlement status will change the real numbers.

Entitlement: full, partial, and second-tier

Entitlement is the amount the VA guarantees on your behalf, and it is the mechanism behind the $0-down feature.

Full entitlement means you have never used a VA loan, or you have used one and had the entitlement fully restored after selling the home and paying off the loan. With full entitlement there is no VA county loan limit and no down payment requirement, subject to lender approval.

Partial entitlement means some of your entitlement is tied up in an existing VA loan, or you had a prior VA loan go through a short sale or foreclosure. With partial entitlement, the conforming loan limit comes back into play, and San Diego County's 2026 limit is $1,104,000. A lender calculates the guaranty available against that limit, and any gap typically has to be covered with a down payment.

Second-tier entitlement is the practical version of the above. It is what allows a service member with an existing VA loan on a home elsewhere to buy a second primary residence with a VA loan after a Permanent Change of Station (PCS) move to San Diego, often still with little or no money down. The calculation is sensitive to the balance on the first loan, so ask a lender to run your specific numbers before you assume a $0-down purchase is available.

You can also request a one-time restoration of entitlement if you have paid off a VA loan but kept the property. It is available once.

Getting your Certificate of Eligibility

The Certificate of Eligibility (COE) is the document proving you qualify. Most lenders pull it electronically in minutes through the VA's automated system. If it does not come back automatically, you can request it yourself through the VA's eBenefits portal or by mail.

What you generally need:

• Active duty. A statement of service signed by your commander, adjutant, or personnel officer.
• Veterans. DD Form 214, member copy 4.
• National Guard and Reserve. Points statements and proof of honorable service, with eligibility typically resting on qualifying years of service or a qualifying period of active-duty service.
• Surviving spouses. VA Form 26-1817 plus the veteran's DD-214. Surviving spouses receiving Dependency and Indemnity Compensation (DIC) are exempt from the funding fee.

The COE confirms eligibility and how much entitlement you have. It does not confirm loan approval. Credit, income, and debt-to-income underwriting still apply, and the VA leaves most of the credit-score bar to the lender, with many lenders landing around 620.

Closing costs and what the VA will not let you pay

The VA restricts which fees a veteran can be charged, which is one of the quieter cost advantages of the program.

• The lender's origination charge is capped at 1% of the loan amount.
• Non-allowable fees cannot be charged to the veteran. These include attorney fees charged by the lender, brokerage or buyer-broker commissions charged by the lender, and prepayment penalties. They can be paid by the seller, the lender through a credit, or the real estate agent.
• Seller concessions are capped at 4% of the loan amount for items like paying the funding fee, prepaying taxes and insurance, or paying off the buyer's debts. Ordinary seller-paid closing costs sit outside that 4% cap.
• The VA appraisal fee and the termite inspection are standard line items in California, and the buyer may pay for the appraisal.

In a competitive San Diego market, sellers do not always agree to concessions. The point is that the ceiling exists and is worth asking for, particularly on a listing that has been sitting.

BAH as a qualifying-income factor

Basic Allowance for Housing (BAH) counts toward qualifying income on a VA loan application. It is non-taxable, and lenders typically gross it up when calculating debt-to-income, which is why an E-5 with dependents can qualify for more house than the base pay alone suggests.

San Diego's FY2026 BAH rates (Military Housing Area CA038) include, for example:

BAH is one factor a lender weighs when calculating what you qualify for. It is not a statement of what you can or should afford, which depends on your full financial picture. Two things worth planning around:

• BAH changes with rank, dependent status, and duty station. A PCS out of San Diego changes the number, but your mortgage payment does not.
• The VA also applies a residual income test, a minimum amount of monthly income that has to remain after the mortgage, taxes, insurance, debts, and estimated maintenance and utilities. It is a real underwriting gate in high-cost areas, and it is part of why VA loans have historically performed well on default rates.

Refinancing later: the IRRRL

If rates fall after you buy, the Interest Rate Reduction Refinance Loan (IRRRL), also called the VA streamline refinance, lets you refinance an existing VA loan with reduced documentation, usually no new appraisal, and no new income verification. The funding fee on an IRRRL is 0.5%, and the fee-exempt categories still apply.

The IRRRL only refinances an existing VA loan into a new VA loan. Moving from FHA or conventional into a VA loan requires a VA cash-out refinance, which is a full underwrite.

Common questions

Can I use a VA loan more than once? Yes. Entitlement can be restored after you sell and pay off the loan, and second-tier entitlement can let you carry two VA loans at once. The subsequent-use funding fee is 3.30% with less than 5% down, so a small down payment goes a long way on a repeat purchase.

Is there a VA loan limit in San Diego? Not with full entitlement. With partial entitlement, the county conforming limit of $1,104,000 governs the guaranty calculation.

Can I buy a multi-unit property? Yes, up to four units, as long as you occupy one of them. Rental income from the other units may be usable as qualifying income, subject to lender rules on rental history and reserves.

Does a VA loan close more slowly? Not meaningfully in this market. The VA appraisal has its own timeline and MPR standards, but San Diego appraisers, lenders, and listing agents handle VA files constantly.

Do I have to pay the funding fee in cash? No. It is normally financed into the loan. If you have a service-connected disability rating, you pay nothing.

Before you make an offer

Financing is only part of the monthly picture. A property's Mello-Roos exposure can add hundreds a month on top of principal, interest, and insurance, and it is common in newer San Diego communities like Otay Ranch, 4S Ranch, and parts of Chula Vista. Check it before you write an offer, not after.

The same goes for Homeowners Association (HOA) dues, California property tax at roughly 1.1% to 1.25% of assessed value once local assessments are layered in, and homeowners insurance. Those four items decide whether the payment you qualified for is the payment you can live with.