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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.
@ SMSgt Minister Gerald A. Thomas Capt Christopher MuellerCOL Mikel J. BurroughsSgt Joe LaBrancheSSgt (Join to see)Capt Seid WaddellSrA Christopher Wright LTC Stephen F.PO2 Ed C. PO2 Mark Saffell MSG Tom EarleyPVT James Strait Alan K. PO1 William "Chip" NagelSGT John " Mac " McConnellSSG Leo Bell SFC William Farrell LTC (Join to see) SPC Britanny *Winnie* Balthaser Maj Kim Patterson
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.
@ SMSgt Minister Gerald A. Thomas Capt Christopher MuellerCOL Mikel J. BurroughsSgt Joe LaBrancheSSgt (Join to see)Capt Seid WaddellSrA Christopher Wright LTC Stephen F.PO2 Ed C. PO2 Mark Saffell MSG Tom EarleyPVT James Strait Alan K. PO1 William "Chip" NagelSGT John " Mac " McConnellSSG Leo Bell SFC William Farrell LTC (Join to see) SPC Britanny *Winnie* Balthaser Maj Kim Patterson
How FHA and VA Loans Stack Up
Posted from military.com
Money
Loans
Posted >1 y ago
Responses: 7
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My husband and I are looking for houses and have discussed both the VA loan and the FHA; we've also thought about Navy Federal as well. We aren't buying a large house, but something that is well within our budget with a little wiggle room for repairs.
Very interesting info. Thanks!
Very interesting info. Thanks!
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MCPO Mark Durland
Good hunting to you! I've had both VA (twice) and FHA. I prefer VA, but both have pretty strict home inspection requirements which protect you as a buyer. Just remember...the less you put down, the longer it takes to build equity.
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Thanks for sharing the basic differences between VA Home Loans and FHA Mortgages - contrast and comparison SP5 Mark Kuzinski
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