FHA Loan vs. VA Loan

There are many different types of home loans that are designed to help low income families and military veterans. FHA loans are loans that are backed by the federal government that allows low income families to qualify for a home loan. A VA loan is a type of home loan that is only offered to military veterans. While only military veterans are able to use a VA loan, military veterans are also allowed to use an FHA loan if they qualify. On the other hand, low income families are only allowed to qualify for an FHA loan and not a VA loan if they are not a military veteran.

Both home loans offer plenty of benefits that first time home buyers can take advantage of. FHA loans usually require a down payment of around 3% for first time home buyers. VA loans in some cases do not require a down payment at all. FHA loans are associated with having a lower closing cost than traditional home loans. The VA home loan allows the individual to finance 100% of the mortgage without a down payment. Both home loans have fewer restrictions on the borrower than traditional home loans.

What type of home that these loans are qualified for will vary depending on the type of home loan is being used. For example, restrictions are made on FHA loans that dictate what homes actually qualify for this type of home loan. Only homes that are approved by HUD will qualify for a FHA home loan. The only restrictions made on VA loans are the amount of financing that will be needed to purchase a home. VA loans do not require the home to be approved by HUD. Instead, the home may not exceed the price of $417,000.

VA loans also have a few more benefits than FHA loans like nor prepayment penalties and easier income standards. The debt-to-income ratio is not scrutinized as much on a VA loan as it is with a FHA loan. VA loans can be used with many mortgage lenders while FHA loans have fewer lenders that support this type of mortgage. Rates can be negotiated with a VA loan while FHA loans typically focus on an income based calculation. Military veterans have more choices with a VA loan than a FHA loan. Since FHA loans can only be used on certain housing areas and homes, most military veterans will use their VA loan instead.

There are plenty of advantages that a VA loan has over an FHA loan. Low income families are not approved for a VA loan, so they will have only the choice of using a FHA loan. However, many military veterans will have a choice between these two types of loans that can leave them confused. The overall benefits of a VA loan will greatly outweigh the benefits of a FHA loan. Having to pay a zero down payment and having 100% of the mortgage finance is a tough benefit to beat.

In fact, the VA loan is considered one of the most beneficial mortgage loans on the market. Only qualified veterans can receive the VA loan. If the veteran has been dishonorably discharged from the service, they may lose the VA loan benefits. Both VA loans and FHA loans are backed by the government, which is a huge security for mortgage lenders. Both types of home loans are typically used by first time home buyers as well. Both loans offer variable rates and fixed interest rates as well. The winner between these two home loans is undoubtedly the VA home loan. Applying for either type of home loan is made easy by going online and researching lenders.