FHA loans vs. VA loans

Learn the differences between FHA loans and VA loans

FHA and VA loans are both good choices for homebuyers because of their competitive interest rates, low down payments, and low minimum credit scores. There are important differences, however.

All U.S. citizens are eligible to apply for FHA loans. Only Veterans, active duty military personnel, and surviving spouses are eligible to apply for VA loans.

When you buy a house with an FHA loan, you can often make a down payment as low as 3.5% of the purchase price. When you buy a house with a VA loan, you can often make no down payment at all.

The cost of FHA monthly mortgage insurance premiums over the life of the loan is often higher than the VA loan mortgage insurance fee (called the VA funding fee) too.

As a result, VA loans are often better choices to buy and refinance homes when you meet the eligibility requirements. Check out our FHA loans versus VA loans comparison table.

What are the benefits of FHA loans versus VA loans?

The primary benefit of FHA loans is their broader eligibility requirements compared to VA loans. Any citizen of the United States who meets the credit and income requirements can qualify for an FHA loan.

FHA loans can have lower upfront mortgage insurance premiums compared to the funding fee required for VA loans. However, FHA loans also have monthly mortgage insurance premiums which VA loans do not have. As a result, the total cost of FHA mortgage insurance over the life of the loan is usually more expensive than the VA funding fee. Learn about FHA mortgage insurance.

What are the benefits of VA loans versus FHA loans?

VA loans typically make buying a home more affordable compared to FHA loans. You can often make a 0% down payment with a VA loan while FHA loans require a down payment of at least 3.5% of the purchase price.

The cost of the VA funding fee is typically lower than the total cost of FHA monthly mortgage insurance premiums over the life of the loan. The VA funding fee on a VA streamline refinance is also less expensive than upfront mortgage insurance on an FHA streamline refinance. Some disabled Veterans and surviving spouses are exempt from paying the funding fee too.

Are there benefits and requirements FHA and VA loans share?

Yes. There are benefits and requirements these loans have in common. These are features which are the same for FHA and VA loans. They include:

• Competitive rates. The interest rate you receive for FHA and VA loans may be similar to the rate you might receive if you were purchasing or refinancing a home with a Conventional loan.
• Low credit scores. At Freedom Mortgage, 550 is our minimum credit score to buy a home or get cash from your home’s equity with FHA and VA loans.
• Easier streamline refinancing. You can often refinance FHA and VA loans with less paperwork and faster closings using the streamline program.
• Property restrictions. You are generally limited to financing only your primary home with FHA and VA loans.
• Financing restrictions. You are generally limited to having one FHA or VA loan at a time.
• Appraisal requirements. FHA and VA loans typically require the home to meet minimum property requirements before your application is approved. Learn about FHA property requirements and VA property requirements.

Freedom Mortgage is a top FHA lender and top VA lender in the United States according to Inside Mortgage Finance, 2023. We can help you buy and refinance homes with FHA and VA loans.

Last reviewed and updated August 2023 by Freedom Mortgage.