How FHA and VA Loans Stack Up

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How FHA and VA Loans Stack Up

The two government-backed loan programs have distinctions. VA loans offer no down payments and a federal guarantee while FHA mortgages can be obtained for 3.5% down and are insured through HUD.

When comparing government-backed mortgage programs, the differences between FHA and VA loans are clear.

VA Home Loans and FHA Mortgages Have Similarities and Differences

VA Home Loans Require:

  • As little as no cash down within conforming loan limits
  • No monthly private mortgage insurance premiums
  • A VA funding fee between .5 and 3.3% (some borrowers exempt)
  • Relaxed qualifying standards
  • Flexibility for all closing costs and up to 4% concessions may be paid by seller
  • Owner occupancy
  • VA benefit eligibility

FHA Mortgages Need:

  • 3.5% minimum down payment
  • Upfront mortgage insurance payment of 1.75% (just .01% for price-cut FHA Streamline)*
  • Monthly mortgage insurance premiums for a minimum of 5 years for most
  • Relaxed qualifying standards
  • Flexibility for all closing costs and up to 3% concessions may be paid by seller
  • Owner occupancy

No Money Down Sets VA Loans Apart

Currently, the conforming loan limit for VA loans is $417,000 in most parts of the country. FHA loans require at least 3.5% down. So, while a $200,000 VA loan can be obtained for no money down, an FHA loan of the same amount will cost a borrower about $7,000 in cash upfront.

VA Loans Require No Monthly Mortgage Insurance Premiums

VA borrowers never pay private mortgage insurance (PMI). Most FHA borrowers will be required to pay an Upfront Mortgage Insurance Premium (UFMIP) of 1.75% as well as monthly MIP of 1.2% or more for a minimum of 5 years for most loans. However, a recent change to the FHA Streamline Refinance program as of June 11, 2012 offers select FHA borrowers* with loans endorsed on or before May 31, 2009 reduced mortgage insurance premiums of just 1.25% UFMIP and .55% MIP. FHA loans with 15-year terms or less and loan-to-value ratios of 78% or less are exempt from monthly premiums.

The VA Funding Fee is Between .5% and 3.3%

A VA funding fee is required by most borrowers using VA home loan benefits. The percentage can vary based on first or repeat use of home loan benefits and whether the borrower is eligible as a result of regular military or Reserves/National Guard service. Regular military first-time benefit users pay 2.14% VA funding fee. All streamline refinances and VA loan assumptions have funding fees of just .5%. Qualified disabled vets and surviving spouses are exempt from the VA funding fee.

Ready to Get Started?

If you're ready to get started, or just want to get more information on the process, the first step is to get multiple rate quotes with no obligation. You can then discuss qualifications, debt to income ratios, and any other concerns you have about the process with the lenders.

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