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After working with thousands of buyers since I started in this business at 18, I can tell you that choosing between an FHA and VA loan is one of the most important financial decisions you'll make. The truth is, most people don't realize how much money is at stake in this choice. We're not talking about a few hundred dollars here and there. The difference between these two loan types can mean tens of thousands of dollars over the life of your mortgage, and that's not even counting the impact on your monthly budget.
Let me be straight with you about something I see all the time: veterans who don't realize they qualify for VA loans end up getting FHA loans and paying mortgage insurance they never needed. On the flip side, I've worked with buyers who tried to force VA loan eligibility when an FHA loan would have been faster and simpler for their situation. Both scenarios cost people money.
Here's what I tell every borrower about government-backed loans: understanding the actual numbers behind your monthly payment matters more than memorizing program names. So let's break down exactly what you're signing up for with each option, including the real costs you'll face at closing and every month thereafter.
Both FHA and VA loans fall into the category of government-backed mortgages, which means a federal agency guarantees a portion of the loan if you default. This protection reduces risk for lenders, which translates to more flexible qualification requirements for you as a borrower.
The Federal Housing Administration backs FHA loans, while the Department of Veterans Affairs backs VA loans. Despite this government backing, you're still getting your loan from a private lender like AmeriSave. The government doesn't actually lend you money directly.
According to the Department of Housing and Urban Development, FHA loans accounted for approximately 14.7 percent of all home purchase mortgages in 2024, while the Department of Veterans Affairs reports that VA loans represented 11.3 percent of the purchase market during the same period. These aren't niche products. We're talking about millions of borrowers annually who use these programs.
Here's the most fundamental difference: FHA loans are available to anyone who meets the credit and income requirements, regardless of their employment history or military service. VA loans are exclusively reserved for military members, veterans, and certain surviving spouses.
For VA loan eligibility, you need to meet one of these service requirements according to VA.gov guidelines:
Active duty service members with at least 90 consecutive days of service qualify immediately. National Guard members need either 90 days of active duty outside of training or six years of service to their credit. Reserve members must complete 90 days of active duty outside training or accumulate six years of creditable service.
Veterans who served during wartime need at least 90 days of continuous active duty, with at least one day during the wartime period. Veterans who served during peacetime typically need 181 days of continuous active duty to qualify.
Surviving spouses of service members who died in service or from service-connected disabilities may qualify, though specific requirements apply. If you've remarried after age 57, you might still retain eligibility in some situations.
The Consumer Financial Protection Bureau notes that approximately 22 million Americans qualify for VA loan benefits, though many don't realize they're eligible or don't understand how to access these benefits.
Let me walk you through the actual dollars on a $300,000 home purchase, because this is where the rubber meets the road.
With a VA loan, your down payment requirement is exactly zero dollars. You can finance 100 percent of the purchase price, meaning you need $0 down on that $300,000 home. Your initial loan amount would be $300,000.
With an FHA loan and a credit score of 580 or higher, you need a minimum 3.5 percent down payment. On that same $300,000 home, you're putting down $10,500 at closing. Your initial loan amount would be $289,500.
If your credit score falls between 500 and 579, FHA requires 10 percent down. That's $30,000 on our $300,000 purchase, with a loan amount of $270,000.
The difference matters more than you might think. That $10,500 you don't have to put down with a VA loan could stay invested in a retirement account earning returns, sit in your emergency fund providing security, or cover moving costs and initial home repairs without touching your existing savings.
According to the National Association of REALTORS®, the median down payment for first-time buyers was 8 percent in 2024, totaling approximately $24,000 on the median home price. For buyers who qualify for VA loans, that's $24,000 they can allocate elsewhere.
This is probably the biggest financial difference between FHA and VA loans, and it's where VA loans really shine for those who qualify.
FHA loans require mortgage insurance premiums in two forms. First, you pay an upfront mortgage insurance premium of 1.75 percent of the loan amount. On a $289,500 FHA loan, that's $5,066 that gets added to your loan balance at closing. You're not writing a check for this amount separately, but you're financing it over 30 years.
Second, you pay annual mortgage insurance premiums ranging from 0.15 to 0.75 percent of the loan amount, divided into monthly payments. On most FHA loans with less than 10 percent down, this annual premium stays with you for the entire life of the loan according to HUD guidelines established in 2013.
Let's work through the actual numbers on our $289,500 FHA loan at 6.75 percent interest. With typical annual mortgage insurance of 0.55 percent, you're paying $1,592 annually or $133 monthly in mortgage insurance. Over 30 years, that's $47,760 in mortgage insurance premiums alone.
Your total monthly payment breaks down as follows: $1,878 for principal and interest, plus $133 for mortgage insurance, plus taxes and homeowner's insurance. In most markets, you're looking at a total monthly obligation between $2,400 and $2,800.
VA loans take a completely different approach. Instead of ongoing monthly mortgage insurance, you pay a one-time VA funding fee that varies based on your down payment and whether you've used your VA loan benefit before.
For first-time VA loan users with zero down payment, the funding fee is 2.15 percent of the loan amount. On a $300,000 loan, that's $6,450. If you put down 5 percent or more, the fee drops to 1.5 percent ($4,500). With 10 percent or more down, you pay only 1.25 percent ($3,750).
For subsequent VA loan usage, the funding fee increases to 3.3 percent with zero down, but remains at 1.5 percent with 5 percent down or 1.25 percent with 10 percent down.
Here's where VA loans really win: that funding fee gets financed into your loan, and then you're done. No monthly mortgage insurance premiums. Your monthly payment on a $306,450 VA loan at 6.5 percent interest would be $1,938 for principal and interest, period.
The monthly savings compared to the FHA loan is approximately $73 ($133 in mortgage insurance you're not paying, minus the slightly higher payment from financing the funding fee). Over 30 years, that's $26,280 in savings. But the real savings is even larger when you factor in the upfront mortgage insurance premium on the FHA loan that you avoid entirely with a VA loan.
Important exception: if you receive VA disability compensation or have received the Purple Heart, you're exempt from the funding fee entirely. The Department of Veterans Affairs reports that approximately 37 percent of VA loan borrowers qualify for a funding fee waiver, representing substantial savings.
The official requirements and the practical requirements often differ, so let me give you the real story from someone who works with these loans every day.
FHA technically allows credit scores as low as 500, but you'll need that 10 percent down payment at that score level. With a score of 580 or higher, you qualify for the 3.5 percent minimum down payment. But here's what actually happens in practice: most lenders, including AmeriSave, set their minimum at 580 because loans with lower scores face higher default risk and stricter underwriting scrutiny.
VA loans have no official minimum credit score requirement from the Department of Veterans Affairs. However, individual lenders set their own overlays. At AmeriSave, we require a 580 minimum credit score for VA loans, matching our FHA requirement. Many lenders across the industry set their minimums between 580 and 620.
According to the Urban Institute's Housing Finance Policy Center, the median credit score for FHA borrowers was 674 in 2024, while VA borrowers had a median score of 711. This tells us that while both programs technically allow lower scores, most approved borrowers actually have fairly strong credit.
If your score falls below 620, you'll face closer scrutiny on your income documentation, employment history, and debt-to-income ratio. Lenders want to see compensating factors like significant cash reserves, low debt levels, or long employment tenure when credit scores are marginal.
VA loans typically offer lower interest rates than FHA loans, though the difference varies with market conditions. According to Freddie Mac's Primary Mortgage Market Survey data from 2025, VA loan rates averaged 0.25 to 0.5 percentage points lower than FHA rates throughout the year.
Let's work through what that rate difference actually costs you using current market rates. Assume you're borrowing $300,000 over 30 years.
With a VA loan at 6.5 percent interest, your monthly principal and interest payment is $1,896. Over 30 years, you'll pay $382,560 in total interest.
With an FHA loan at 6.75 percent interest, your monthly principal and interest payment is $1,946. Over 30 years, you'll pay $400,560 in total interest.
That 0.25 percentage point difference costs you $50 monthly and $18,000 over the life of the loan. If the rate difference stretches to 0.5 percentage points, you're looking at $100 monthly or $36,000 over 30 years.
Why do VA loans get better rates? Two main reasons: First, VA loans have historically lower default rates compared to FHA loans, giving lenders more confidence. The Department of Veterans Affairs reports a serious delinquency rate of 2.93 percent for VA loans in Q3 2025, compared to 4.97 percent for FHA loans according to the Mortgage Bankers Association.
Second, the VA's loan guarantee is more generous than FHA's insurance, typically covering 25 percent of the loan amount. This stronger backing translates to lower risk premiums from lenders, which they can pass along as lower interest rates to borrowers.
Both FHA and VA loans come with property condition requirements that can affect which homes you can purchase, but VA requirements are generally more strict.
FHA requires properties to meet HUD's Minimum Property Standards, which focus on safety, security, and structural soundness. The appraiser looks for issues like peeling paint in homes built before 1978, faulty electrical systems, broken windows, missing handrails, and foundation problems. Minor issues can often be addressed through a repair escrow where the seller agrees to fix problems before or shortly after closing.
VA property requirements are more stringent because the VA wants to ensure that veterans are buying quality homes that will maintain their value. In addition to safety and structural issues, VA appraisers examine roof condition more closely, requiring repairs if remaining life is less than two years. They inspect for wood-destroying insects and require treatment if evidence is found. They verify adequate heating systems exist in all living spaces.
The practical impact: some sellers refuse VA loans because they don't want to deal with potential repair requirements. I've worked with buyers who had VA financing but faced resistance from sellers who preferred conventional or FHA offers, even when the VA buyer was better qualified financially. This is less common in strong seller's markets where veterans can compete effectively, but it remains a consideration.
FHA loan limits vary by county and are updated annually. For 2026, the baseline limit in most counties is $524,225 for a single-family home, according to HUD's annual adjustment. High-cost areas have higher limits, with some counties reaching $1,209,750. These limits represent the maximum loan amount FHA will insure, not the maximum home price you can purchase since you'll be making a down payment.
VA loans work differently. Since 2020, the VA eliminated loan limits for borrowers with full entitlement, meaning veterans with no existing VA loans can borrow any amount the lender approves without a down payment. The conforming loan limit of $806,500 for 2026 only matters if you've previously used your VA loan benefit and haven't restored your entitlement.
For veterans who still have partial entitlement remaining, the calculation gets more complex. Your available entitlement determines how much you can borrow without a down payment. If you want to exceed that amount, you'll need to put down 25 percent of the difference.
In practical terms, if you're buying a $500,000 home with a VA loan and full entitlement, you can finance the entire amount with no down payment. With an FHA loan on the same home, you need a minimum $17,500 down payment, and if your county's FHA limit is lower than $500,000, you can't use FHA financing at all.
Both FHA and VA offer streamlined refinancing programs that reduce documentation requirements and processing time for existing borrowers.
FHA Streamline Refinance allows you to refinance your existing FHA loan with limited credit checks and often no appraisal required. You must demonstrate a net tangible benefit, typically defined as lowering your interest rate by at least 0.5 percentage points or reducing your monthly payment by a certain dollar amount. You can't take out more than $500 in cash from the transaction, and you must have made at least six payments on your current FHA loan.
The VA Interest Rate Reduction Refinance Loan, commonly called an IRRRL or VA Streamline, allows similar simplified refinancing for existing VA borrowers. You can lower your interest rate, convert from an adjustable-rate to fixed-rate mortgage, or refinance from a different loan type into a VA loan in certain circumstances. No appraisal is typically required, credit requirements are minimal, and you can roll your closing costs and funding fee into the new loan.
According to the Mortgage Bankers Association, streamlined refinances accounted for 43 percent of all VA refinances and 28 percent of all FHA refinances in 2024, demonstrating how valuable these programs are to existing borrowers when rates decline.
If you qualify for a VA loan and you're buying a home you plan to live in, that's almost always going to be your best option. The combination of no down payment requirement, no monthly mortgage insurance, and lower interest rates creates savings that compound over the life of your loan.
Let me show you the total cost comparison on a $300,000 home purchase to make this concrete. With a VA loan, you need zero down payment, you pay a $6,450 funding fee that gets financed, your loan amount is $306,450, and your monthly principal and interest payment at 6.5 percent is $1,938. Add taxes, insurance, and HOA fees, and you're probably around $2,600 monthly total housing payment.
With an FHA loan, you need $10,500 down payment, you pay a $5,066 upfront mortgage insurance premium that gets financed, your loan amount is $294,566, your monthly principal and interest at 6.75 percent is $1,911, plus you pay $135 monthly for ongoing mortgage insurance. Your total monthly housing payment runs around $2,750.
The FHA loan costs you $10,500 more at closing and approximately $150 more per month. Over five years, that's $19,500 in additional costs. Over 30 years, the ongoing mortgage insurance alone adds $48,600 to your total housing costs.
However, FHA loans make sense in certain scenarios. If you don't qualify for a VA loan due to lack of military service, FHA is often your best path to homeownership with minimal down payment. If you're buying in a competitive market where sellers have multiple offers, some will accept FHA over VA because of the less stringent property requirements.
At AmeriSave, we work with both FHA and VA borrowers every day, and we can help you determine which program fits your situation best. Whether you're a veteran looking to leverage your benefits or a first-time buyer who needs FHA's low down payment option, we have the expertise to guide you through the process and get you to closing efficiently.
The bottom line is this: if you've served our country and earned your VA loan benefit, use it. The financial advantages are too significant to ignore. And if FHA is your best option, that's a powerful program too that has helped millions of Americans achieve homeownership who wouldn't otherwise qualify for conventional financing.
Yes, you can use your VA loan benefit more than once, but there are some rules. Your entitlement is the amount of money that the VA guarantees the lender. This entitlement is used in some way for each VA loan. Most veterans will have $806,500 in benefits available by 2026. But this amount can change depending on how long you've been in the military. If you already have a VA loan on another property, you're using some of your entitlement. You can still get another VA loan, but you will have to either sell the first property and get your entitlement back or make a down payment on the second property to cover the part that is more than what you have left. The exact amount depends on the loan amount, the county's loan limits, and how much entitlement you have already used up. For example, if you used $200,000 of your entitlement to buy your first home and that home is in a county where the conforming loan limit is $806,500, you would have $606,500 left over to buy a second home in that county or one like it. But if you sell your first house and pay off the VA loan, you can get back the full amount of your entitlement and use it again without any restrictions. Many veterans have used this benefit more than once in their lives when they move for work, buy a bigger house, or downsize when they retire.
You will need mortgage insurance for the whole life of the loan if you put down less than 10% on an FHA loan that started after June 2013. The old FHA policy said you could cancel your mortgage insurance once you had 22 percent equity. This is a big change from that. Your mortgage insurance will end automatically after 11 years of payments if you put down 10% or more. If you have an FHA loan with less than 10% down, you can only get rid of mortgage insurance if you refinance into a different type of loan, usually a conventional loan, after you have at least 20% equity in your home. You can refinance your home when its value goes up or when you pay off enough of the principal to reach the 20% equity level. The timing is very different from market to market, but in places where prices are steadily going up, many borrowers reach 20 percent equity in 5 to 7 years by paying down their principal and the market going up. Keep in mind that refinancing costs money, so you need to decide if the money you save by getting rid of mortgage insurance is worth the cost of refinancing. If you want to live in the house for at least three years and save at least $200 a month, it makes sense to refinance to get rid of FHA mortgage insurance.
If you qualify for both programs, the VA loan is almost always the better financial choice. You don't have to make a down payment, pay monthly mortgage insurance, or pay higher interest rates, which all save you a lot of money over the life of the loan. Let me give you a specific example to make this clearer. You don't have to put any money down if you buy a house with a VA loan for $350,000. You do have to pay a one-time funding fee of about $7,525, which is added to your loan. Without mortgage insurance and with a 6.5 percent interest rate, your monthly payment would be about $2,262 for the principal and interest. If you get an FHA loan for the same house, you'll need to put down $12,250, pay an upfront mortgage insurance premium of about $6,031, and pay monthly mortgage insurance of about $156. At 6.75 percent, your total payment for the principal, interest, and mortgage insurance would be about $2,349. You save $12,250 up front with the VA loan, but you pay a little more in financing fees at first. Your monthly payment is lower, though. In just mortgage insurance, it saves you about $56,160 over 30 years. The only times FHA might be better than VA are if the seller says they won't accept VA financing because they're worried about the property's condition, if you're buying a property that doesn't meet VA's minimum property requirements but does meet FHA's, or if you're in a special situation where VA loan processing times are much longer than FHA's and you need to close quickly for a specific reason. These things don't happen very often, and in almost all cases, it's better for your money to use your VA benefit.
The funding fee and mortgage insurance are the main things that set them apart. Also, these programs have different ways of handling closing costs. Both types of loans have the same closing costs, like fees for appraisals, credit reports, title insurance, recording, and lender origination. According to ClosingCorp, the average closing costs for FHA and VA loans are between 2 and 5 percent of the loan amount. The exact amounts depend on where you live and who you borrow from. On the other hand, VA loans have some special protections for closing costs. The VA doesn't let lenders charge veterans for certain fees, like attorney fees for the lender's legal work, document preparation fees, loan application or processing fees, and some underwriting costs. The VA also puts a cap on how much lenders can charge for origination, which is 1% of the loan amount. These restrictions can lower the total closing costs by hundreds to thousands of dollars compared to FHA loans. VA also lets sellers pay up to 4% of the purchase price to help with the buyer's closing costs. FHA only lets sellers pay 6% or less. FHA technically lets sellers give up more, but in practice, both programs give sellers enough room to cover most or all of the buyer's closing costs during negotiations. One big difference is that veterans have to pay the VA funding fee or add it to the loan. FHA, on the other hand, always pays the upfront mortgage insurance premium. As part of the negotiations for both programs, you can ask sellers to pay these fees. Many sellers will agree to help with these costs to make the sale go more smoothly.
FHA and VA loans are more forgiving of past money problems than regular loans, but you will have to wait a certain amount of time after bad things happen and show that you have gotten back on your feet financially. If you have good credit and can show that the things that caused your bankruptcy were not your fault, you can usually get an FHA loan again two years after your bankruptcy is over. FHA says you have to wait three years after a foreclosure. Short sales or deeds in lieu of foreclosure also have a three-year waiting period. In some cases, these waiting periods may be shorter if you can show that you had to wait longer because of things like a serious illness, the death of a main wage earner, or other things that made your finances temporarily hard. The rules for VA loans are similar, but they are a little more flexible. After your Chapter 7 bankruptcy is over, you usually have to wait two years. If you've paid all of your bills on time and the court trustee agrees to let you take out the loan, you might be able to get a Chapter 13 bankruptcy after just 12 months. It usually takes two years for a VA loan to go into foreclosure. But in some cases, this time can be stretched to three years. After having money problems, you need to show that you've rebuilt your credit, kept a steady job and income, and learned how to manage your money responsibly. Most lenders want to see credit scores above 620, but the lowest score might be lower. This is because higher scores mean that you have successfully gotten your money back on track.
FHA and VA loans don't have any limits on how much money you can make. You can still qualify for these programs no matter how much money you make. But both programs have debt-to-income ratio requirements that limit how much you can borrow based on how much money you make. The highest debt-to-income ratio for FHA loans is 43%. This means that all of your monthly debt payments, including your new mortgage payment, can't be more than 43% of your gross monthly income. Some lenders will let you borrow up to 50% of your income if you have good credit, a lot of cash on hand, or not much debt other than your mortgage. If you make $6,000 a month before taxes, your maximum monthly debt payment would be $2,580 at a 43% debt-to-income ratio. The most you can pay for a mortgage, including the principal, interest, taxes, insurance, and mortgage insurance, is $2,080 if you already have $500 in car loans, student loans, and credit cards. VA loans have similar rules about debt-to-income ratios, with a maximum of 41% for their residual income calculation. But this number can go up if there are strong reasons to do so. The VA also has a special residual income requirement that makes sure you have enough money left over after paying all of your monthly bills to cover your basic living costs. The size of your family, where you live, and how much money you owe all affect how much residual income you need. It's like having an extra safety net on top of your basic debt-to-income ratios. In the end, you need to make enough money to pay your mortgage and other debts, as well as your basic needs. But there is no limit on how much money you can make and still use these programs.
FHA and VA loans are mostly for buying primary residences, which are homes that you plan to live in as your main home. You can't buy a vacation home or an investment property with either program. You can use FHA loans to buy single-family homes, condos that meet FHA approval requirements, townhouses, and multi-unit properties with up to four units, as long as you live in one of the units as your main home. This choice with more than one unit is great for buyers who want to "house hack" by renting out extra units to help pay the mortgage. VA loans can be used to buy single-family homes, VA-approved condos, townhouses, and multi-unit properties with up to four units that the owner lives in. You can also use VA loans to buy manufactured homes that meet VA standards, like having permanent foundations and HUD approval. Getting permission to buy a condo is one big difference. To get FHA or VA financing for a condo, the whole condo project must be approved by FHA or VA, not just your unit. Many condos don't have this approval, which can make it harder to buy one. Getting approval for condo projects is hard, and a lot of smaller ones still haven't finished the process. Both programs let you buy homes that need some work, but the homes must meet certain safety and livability standards. With an FHA 203k loan, you can pay for both the home and the renovations with just one loan. VA also offers renovation loans, but they are less common and have more requirements.
It usually takes about the same amount of time to close on an FHA or VA loan as it does on a regular loan. It usually takes 30 to 45 days from the time you apply to the time you close, but this can change based on a number of things. According to the Mortgage Bankers Association, it took an average of 42 days to close on all kinds of loans in 2025. Loans backed by the government took a little longer, usually 44 to 46 days. How quickly you send in the paperwork, how busy your lender is, whether the appraisal finds any repairs that need to be made, any title issues that need to be fixed, and how complicated your finances are will all have an effect on how long it takes to close. VA loans may take a few extra days if the property needs repairs that the VA says must be done before closing or if you need to get certain documents from the VA, like your Certificate of Eligibility. If you're almost eligible for an FHA loan but the underwriters need more paperwork to approve your application, it may take longer. But lenders who are used to dealing with a lot of FHA and VA loans can often close these loans just as quickly as regular loans. At AmeriSave, we've closed VA and FHA loans in as little as 21 days when borrowers quickly send in their paperwork and there are no problems. No matter what kind of loan you have, the key to closing quickly is to have all the paperwork ready ahead of time, respond quickly to any requests from the lender, and work with a lender who knows your loan type and how to get things done quickly.
If you qualify for VA benefits, you can switch from an FHA loan to a VA loan. This is usually a smart financial choice. Refinancing to a VA loan can get rid of your monthly mortgage insurance and maybe even lower your interest rate if you bought your home with an FHA loan before you were eligible for VA benefits or if you didn't know you were eligible for VA benefits. Just like with any other refinance, you apply for a new VA loan that pays off your current FHA loan. You will have to pay the VA funding fee, which is usually 2.3% for your first VA loan and 3.6% for any loans after that. But you can add this fee to the new loan. The good news is that FHA mortgage insurance is no longer required, which costs most loans between $100 and $200 a month. Most people who switch from an FHA loan to a VA loan get their money back in two to three years through lower monthly payments, even after paying closing costs and the funding fee. They then save a lot of money for the rest of the loan. You can also refinance from VA to FHA, but this is less common because it doesn't make sense most of the time. You would only think about this if you really needed money and went over the VA loan limits, if you somehow lost your VA eligibility (which is rare), or in special cases like divorce or property transfer where FHA might have more flexible options. When you become eligible, the usual order is FHA to VA, not the other way around.
You have to live in the property as your main home for at least a year after closing on an FHA or VA loan. You also have to live in it as your main home for at least 60 days after closing. But both programs know that life changes, and military members have to deal with relocation orders that can come out of nowhere. FHA and VA both say that if you get military Permanent Change of Station orders before the 12-month occupancy period is up, this is a good reason to leave the property early. You won't have to pay back the loan or face any penalties. You can rent out the property to make money while you're away. You can even use another VA loan to buy a new home at your new duty station if you have enough entitlement left. You can still meet the occupancy requirement for FHA loans if you move more than 100 miles for a real job or another documented reason, even if you do it before 12 months. It's important to write down why you're moving and that you didn't see it coming when you bought the house. If you know ahead of time that you won't live in the property as planned or that you plan to turn it into a rental right away, you can't buy it with either loan type. This would be occupancy fraud, which means that the loan is due right away and you could be charged with a crime. Lenders check occupancy by looking at things like insurance papers, utility bills, and voter registration. You may also have to prove that you really lived in the house as your main home before you had to move.
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