A FHA vs. VA loan comparison reveals key differences. VA loans, for eligible military members, offer 0% down and no mortgage insurance. FHA loans, available to a wider audience, require a minimum 3.5% down and mortgage insurance. VA loans generally have lower interest rates and no loan limits with full entitlement, making them often superior for those who qualify.
VA Loans vs. FHA Loans: What’s the Real Difference?
Both FHA and VA loans help people who don’t fit the cookie-cutter mold of traditional mortgage approval. Lower credit, smaller down payments—these loans work around those hurdles.
But they’re not the same.
- VA loans – Exclusively for veterans, active-duty service members, and some military spouses. No down payment. No mortgage insurance.
- FHA loans – Open to anyone. Small down payment (as low as 3.5%). Requires mortgage insurance.
If you’ve served in the military, a VA loan usually wins—zero down and lower fees. But if you’re not eligible, an FHA loan still makes home buying easier.
Who Qualifies for a VA Loan?
The biggest limiter here is service. VA loans are for:
- Veterans
- Active-duty military members
- Some National Guard and Reserve members
- Eligible spouses of deceased service members
Got VA benefits? You probably qualify.
Who Qualifies for an FHA Loan?
If you’re breathing and meet the lender’s basic requirements, you’ve got a shot.
- Credit score of at least 580 for 3.5% down (500–579 requires 10% down)
- Stable income and employment history
- Debt-to-income (DTI) ratio under 57% (some lenders require lower)
Bottom line—FHA loans are one of the most flexible options for first-time homebuyers or those recovering from past financial bumps.
Down Payment: VA Loan vs. FHA Loan
This is where VA loans crush FHA loans.
- VA Loan: 0% down. None. Zero. Nada.
- FHA Loan: Minimum 3.5% down if credit is 580+, 10% if lower.
The catch? FHA loans make you pay mortgage insurance if you put less than 20% down, so you’re paying extra each month. VA loans? No mortgage insurance. That alone saves you thousands over time.
Mortgage Insurance: Do You Have to Pay It?
Every FHA loan requires mortgage insurance.
- Upfront Mortgage Insurance Premium (UFMIP): 1.75% of the loan amount (financed into the loan).
- Annual Mortgage Insurance Premium (MIP): 0.45–1.05% of the loan amount per year.
Plan to hold onto the home long-term? Mortgage insurance sticks unless you refinance into a conventional loan later. VA loans don’t require mortgage insurance. Ever. Instead, you pay a one-time funding fee (unless you’re exempt), which can be rolled into the loan.
VA Loan Funding Fee vs. FHA Mortgage Insurance
VA loans don’t have mortgage insurance, but they do have a funding fee. Here’s how it stacks up:
| Loan Type | Upfront Cost | Ongoing Costs |
|---|---|---|
| VA Loan | Funding fee (2.15%–3.3% for first-time buyers, lower for repeat users with a down payment) | No monthly mortgage insurance |
| FHA Loan | Upfront Mortgage Insurance Premium (1.75%) | Annual Mortgage Insurance (0.45%–1.05%) |
If you’re exempt from the VA funding fee (veterans with service-connected disabilities often are), VA loans become an even better deal.
Credit Score Requirements: VA vs. FHA
FHA loans have a clear cutoff.
- 580+ credit score: 3.5% down
- 500–579 credit score: 10% down
VA loans don’t have a government-mandated minimum credit score.
Lenders usually want a 620+, but some go lower based on your overall financial profile.
Loan Limits: Will They Cap Your Purchase?
VA loans only have loan limits if you have remaining entitlement. If you have full entitlement, no loan limits apply. That means you can buy a home up to whatever amount your lender will approve. FHA loans always have limits. These change annually and vary by location. In 2024, FHA loan limits range from $498,257 to $1,149,825, depending on the county.
Which Loan Has Lower Interest Rates?
VA loans almost always have lower interest rates than FHA loans. Why? The government backs VA loans with a stronger guarantee, making lenders more comfortable. That lower risk means you get better rates.
FAQs
Can I qualify for both a VA loan and an FHA loan?
Yes. If you’re a veteran or service member, you can qualify for both. But if you’re eligible for a VA loan, it’s usually the better deal.
Can I use a VA loan if I used one before?
Yes. You can use a VA loan multiple times as long as your entitlement is restored or you have remaining entitlement available.
What happens if I default on a VA or FHA loan?
Just like with any mortgage, foreclosure is a risk if you can’t make payments. However, VA loans often offer better assistance programs to help struggling borrowers.
Avoiding foreclosure? Check out refinancing options at reAlpha’s blog.
Do FHA loans or VA loans take longer to close?
Timelines depend more on your lender than the loan type. On average:
- VA loans: 40–50 days
- FHA loans: 45–50 days
Experience matters. Work with lenders who know how to move fast.
Which loan is better for first-time homebuyers?
If you qualify for a VA loan, take it. If not, FHA loans are one of the easiest entry points to homeownership.
Conclusion
Home buying done right? That’s the goal. Get expert tips at reAlpha’s blog. VA loans vs. FHA loans—one size doesn’t fit all, but if you qualify for a VA loan, the perks usually win.