The Difference Between FHA and VA Mortgage Loans
When it comes to helping Americans receive a home loan, the United States offers a lot of support.
There are two major departments of government which insure loans so that home buyers may qualify more easily. The Federal Housing Administration (FHA Loans) and Veteran Affairs (VA Loans).
Although both help Americans with their homes loan, these two departments are very different and have separate goals.
Major Differences of FHA and VA Loans
FHA Loans VA Loans
Down Payment Low Down Payment No Down Payment
Credit Score Low FICO Accepted Low FICO Accepted
Mortgage Insurance Mortgage Insurance Premiums No MIP Needed
The main difference between the two government mortgage programs is that you must be a United States veteran to qualify for a VA loan. An FHA loans main requirement is a loan limit set by county.
•Find Loan Limit for Your County at HUD
The HUD website offers FHA loan limits by county. All you must enter is your state and county name, then press “send”.
The Federal Housing Administration’s Goal
FHA loans have been helping Americans from every walk of life for decades. First time home buyers receiving their first home loan with a lower down payment and easier credit qualifications. Senior citizens taking cash out of their home so that they may pay for living expenses.
Veteran Affair’s Goal
United States military veterans receive VA insured loans as a part of their benefits. Veteran Affair’s assists veterans in receiving the best mortgage possible from low monthly payments to extremely low mortgage rates. Veterans are not required to put a down payment on their home and they are not required to pay mortgage insurance premiums. This is because the VA ensures the veteran’s credibility to repay the loan.
FHA Guideline Changes and Updates
Both VA and FHA will update their guidelines often, however, the Federal Housing Administration has been making their lending requirements much more strict and updating them more often. Changes to the FHA guidelines are usually to protect the FHA as well as the home buyer.
Both government programs offer benefits to home buyers, however VA loans are the only ones to offer a no down payment option. The FHA will allow lower down payments than a conventional loan but does not allow for zero down home loans. An FHA loans minimum down payment is 3.5% which is lower than the 5% down payment required for conventional mortgages. Aside from VA loans, FHA loans offer the best benefits to first time home buyers who need less stringent lending requirements.
Although you can refinance with both programs, after the recent housing market crash many homeowners were left with higher loan amounts than their homes value. VA loans will not let you refinance with a high loan-to-value (LTV) ratio. FHA on the other hand has created a refinance program known as the FHA streamline refinance loan. FHA streamline allows you to refinance your FHA loan without an appraisal and very little documentation. This means a high LTV will not affect your chances of qualifying and many times, neither will financials.
Last updated on January 10, 2014
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