The Difference between VA and FHA loans

by Mike on April 19, 2010

A couple weeks ago, I wrote about the upcoming FHA loan insurer increase. While the premiums have increased, an FHA insured loan is still a good option for home buyers. However, if you qualify, there is a better option. The VA loan is a mortgage loan backed by the U.S. Department of Veteran Affairs. The VA loan is similar to the FHA with a few added perks, if you’re qualified.

Qualifications for VA:

  • Wartime / Conflict veterans who served at least 90 days consecutively and were not dishonorably discharged
  • Peacetime service of at least 181 days of continuous active duty service and not dishonorably discharged
  • Enlisted veterans whose service began after September 7, 1980, or officers whose service began after October 16, 1981, must normally have served at least two years.
  • Reserve & National Guard members who have completed six years of service and have been honorably discharged (or are still serving) may be eligible for a VA loan.
  • There are additional qualifications, so if you think you may qualify, contact your regional Veterans Administration office.

VA insured loans offer some advantages over FHA:

  • VA loans do not require a down payment, where FHA requires a minimum of 3%
  • VA loans allow 100% financing without private mortgage insurance
  • VA allows seller to pay up to 4% of closing costs
  • Though VA does not have a maximum sales price, typically they are insured up to $250,000. Though this varies from county to county. The number may also be higher in some high priced areas of the country.
  • No prepayment penalties
  • Interest rates aligned competitively

The one disadvantage is the VA funding fee, but this may also be financed. Alternatively, this fee may be lowered with a down payment of at least 5%

If you are planning to take advantage of the Homebuyer’s tax credit, you’ve probably already made your decision on what type of loan (if any) you’d be using. It’s always good to shop around! VA loans are excellent if you are eligible, but do not dismiss FHA and conventional loans until you’ve run the numbers for yourself.

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{ 4 comments… read them below or add one }

Bucksome Boomer April 20, 2010 at 6:40 am

Nice run-down on the VA loan. Even though I used this type of loan twice, I learned new things. I would like to point out that a veteran can use the loan more than once but not concurrently.

We didn’t even consider it when applying for our current mortgage. We rolled over a large amount of equity from our previous home and it was cheaper to go with the credit union.
.-= Bucksome Boomer´s last blog ..Week in Review: Wedding Bells Edition =-.

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PF Journey April 20, 2010 at 11:38 am

Excellent points Bucksome! Thanks for pointing out that you can use the loan more than once, and also that it may not always be the cheapest option…why again, it is good to shop around!

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Petra October 5, 2011 at 6:24 am

Good reading, gives even more for thinking about those loans… Thanks!
.-= Petra´s last blog ..Muscle Relaxers Over The Counter =-.

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Jennyb October 13, 2011 at 9:15 am

Great for me that I found your Blog… I just started with my own Blog, can I reference to this post? I want to write something on similiar topic!
.-= Jennyb´s last blog ..Blogging guide for beginners =-.

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