Ease the financial burden of buying a home with these government-backed loans.
Buying a home is among the biggest and most exciting commitments you’ll ever make. But how do you choose the right financing? Like every mortgage, FHA and VA loans have their advantages and disadvantages.
How do FHA loans differ from VA loans?
Both are government-backed mortgage programs, but they come with different eligibility requirements, terms and loan limits.
|FHA loans||VA loans|
|Eligibility||Anyone who meets the income and credit score requirements||Eligible veterans and surviving spouses who have not remarried|
|Institutional support||Federal Housing Administration||Veterans Administration|
|Credit score requirement||500 or higher||None|
|Down payment||3.5% to 20%||None|
|Lender options||Any FHA-approved lender||Any VA-approved lender|
(The VA can lend directly, but it’s rare.)
|Interest rates||Subject to market conditions and negotiable between the lender and borrower||Subject to market conditions and negotiable between the lender and borrower|
|Types of properties||– Single-family homes and 2- to 4-unit properties|
– Select manufactured and mobile homes
– FHA-approved condos and townhomes
|– Single-family homes and 2- to 4-unit properties|
– Select manufactured, mobile and modular homes
– VA-approved condos
– Select construction sites
Learn more about FHA loans
Learn more about VA loans
What are the benefits of a FHA loan and a VA loan?
Each loan offers fixed rates and is designed to ease the financial pressure of buying a home. The finer details vary by loan type.
What are the drawbacks of FHA loans and VA loans?
For both loans, seller hesitation can be a factor — especially in a hot market. Consider the other potential disadvantages by mortgage type.
Which option is best for my needs?
It depends on your situation. FHA loans are popular, especially with first-time homebuyers earning a low to median income. Given lenient eligibility requirements, they’re a good option for borrowers with high debt-to-income ratios and low credit scores.
To avoid being blindsided, factor the required mortgage insurance into your budget. You’ll pay an upfront premium at closing and then make monthly payments for the life of the mortgage.
VA loans don’t require a down payment or mortgage insurance, which cuts your overall costs significantly. They also come with attractive tax perks and relaxed credit requirements. But they’re open to military members only.
The big question: Do you qualify for a VA loan? These loans are notorious for strict home assessments. So if you’re eligible, your best bet is to find a home that’s ready to move into to speed up the appraisal process.
While FHA loans are flexible and easier to apply for, borrowers are hit with monthly insurance payments that last the life of the mortgage. But VA loans are exclusive: Requiring no down payment, they’ve opened the homeownership doors to many military members.
Compare your home financing options in our comprehensive guide to mortgages.