FHA vs. VA Loan | What Is The Best Choice In 2024?

Jun 27, 2024

When you start looking into buying a home, the maze of loan options can be overwhelming. Two options that often come up are FHA and VA loans, each serving specific groups with their own sets of benefits. So, what makes these loans different from more traditional mortgages, and why might they be a good fit for you?

Table of Contents

FHA Vs. VA Loan

  1. What are FHA Loans?
  2. What are VA Loans?
  3. How Do FHA and VA Loans Differ in Eligibility Requirements?
  4. Down Payment Demands: Which Loan Eases the Financial Burden?
  5. Choosing Between FHA and VA Loans
  6. FAQs

What are FHA Loans?

FHA loans, insured by the Federal Housing Administration (FHA), are crafted to lower the barriers to homeownership for those who might find a conventional mortgage out of reach. 

The backing by the FHA allows lenders to offer favorable terms to borrowers who might not qualify under conventional lending standards. This includes those with lower credit scores and those unable to make a large minimum down payment.

The minimum credit score requirement for most FHA loans stands at 580, allowing for a down payment as low as 3.5%. For those with credit scores between 500 and 579, a 5% to 10% down payment is typically required. This flexibility makes FHA loans an attractive option for many first-time buyers or those rebuilding their credit.

men and women sitting near the table

What are VA Loans?

On the other hand, VA loans offer significant advantages to those who have served our country. Administered by the U.S. Department of Veterans Affairs, VA loans are available to active-duty service members, members of the National Guard, veterans, and certain surviving spouses. The hallmark of a VA loan is that it allows eligible VA loan borrowers to purchase a home with no down payment, no mortgage insurance, and competitive interest rates.

The VA funding fee, a one-time fee charged to VA loan borrowers, helps fund the program. This fee varies depending on several factors, including whether the borrower is using the VA loan benefit for the first time and the size of the down payment. However, certain borrowers, such as disabled veterans and some surviving spouses, are exempt from this fee.

How Do FHA and VA Loans Differ in Eligibility Requirements?

When comparing FHA and VA loans, the eligibility criteria varies to different groups of borrowers. Here’s a detailed look:

FHA Loans

These loans are insured by the Federal Housing Administration (FHA) and are designed to help individuals who may not qualify for a conventional mortgage. To apply, you need a minimum credit score of 580 to qualify for the 3.5% down payment option. If your score is between 500 and 579, you’re looking at a minimum down payment of 5% to 10%. These loans are available to anyone who meets the credit and income requirements.

All FHA loans require mortgage insurance premiums (MIP). This includes an upfront payment typically around 1.75% of the loan amount, which can be rolled into the mortgage, plus an ongoing annual premium.

While FHA loans might seem accessible due to lower credit score requirements, the added cost of MIP can make them less attractive over the long term.

FHA loans require proof of income, credit reports, and details of other debt payments, along with a clear record of your ability to meet debt to income ratios.

man drawing home

VA Loans

Exclusive to service members, veterans, members of the National Guard, and some surviving spouses, VA loans are backed by the U.S. Department of Veterans Affairs. There is no minimum credit score requirement set by the VA, although lenders might have their own criteria, typically around 580. To qualify for a VA loan, one needs to provide a Certificate of Eligibility (COE), which proves your service status.

VA loans include a VA funding fee, which varies depending on the amount of the down payment and the borrower’s military category. This fee can also be financed into the loan.

The VA funding fee serves a similar purpose to mortgage insurance but can be a more cost-effective solution since it’s a one-time fee unless refinancing occurs.

VA loans also require similar documentation but add the need for the COE, and often a statement of service if still active duty.

Down Payment Demands: Which Loan Eases the Financial Burden?

In FHA Loans, the minimum down payment for most borrowers is 3.5% if your credit score is above 580. This makes it a manageable option for many first-time homebuyers or those without substantial savings.

VA Loans, arguably the biggest benefit here is the $0 down payment requirement. For those eligible for a VA loan, this can significantly ease the initial financial burden of purchasing a home.

Impact on Upfront Costs

VA loans allow eligible buyers to enter homeownership with minimal initial financial strain, offering a profound advantage over FHA loans in this aspect.

FHA loans provide flexibility for those who do not meet the stringent requirements of conventional mortgages but come with higher upfront costs due to the down payment requirements.

a happy picture of husband and wife signing papers

Choosing Between FHA and VA Loans

When picking between FHA and VA loans, consider your eligibility and what each option means for your financial landscape. FHA loans are ideal if your credit isn’t perfect or if saving for a large down payment is challenging—they do, however, require mortgage insurance

VA loans, reserved for veterans and certain military members, offer benefits like no down payment and no mortgage insurance, making them financially appealing if you qualify. Discussing your options with a loan specialist can help you make an informed choice that suits your home buying goals.


  1. Can I use an FHA loan for a fixer-upper?

Yes, you can use an FHA loan to buy a fixer-upper. The FHA 203(k) loan program is specifically designed to fund both the purchase of a home and the cost of its rehabilitation through a single mortgage.

  • Are there any prepayment penalties with FHA or VA loans?

No, there are no prepayment penalties with either FHA or VA loans. You can make extra payments or pay off the loan early without any financial penalties.

  • Can I refinance my current home loan into an FHA or VA loan?

Yes, both FHA and VA loans offer refinancing options. FHA provides a streamline refinance program for existing FHA loans, and the VA offers a similar streamline refinancing program (IRRRL) for existing VA loans.

  • Is there a difference in the time it takes to close an FHA vs. a VA loan?

The closing time for both FHA and VA loans typically ranges between 20 to 30 days. However, individual circumstances like lender workload, borrower’s documentation, and appraisal processes can affect the exact timing.

  • Can I rent out my home if I have an FHA or VA loan?

For FHA loans, you are required to live in the property as your primary residence for at least one year before renting it out. VA loans also require the home to be your primary residence, but you can rent out parts of your home or the entire property after satisfying the occupancy requirements.


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About Rob Sturms

With over three decades of experience, Rob Sturms is a trusted name in Colorado’s mortgage industry. Since 1993, he has been guiding clients with honesty and expertise through various loan options, ensuring personalized solutions for each homeowner’s journey. As the founder of Rob’s Mortgage Loans, Rob’s commitment to transparency and tailored service makes him the go-to choice for reliable lending assistance.