VA Loans vs FHA Loans - there's really no comparison

With the holidays fastly approaching and it being the day before Thanksgiving, we get to thinking about what's important in our world. It's hard to ignore that there are men and women away from home this Thanksgiving as they serve to protect our country. Veterans, there are programs out there avaiable to help you for your service VA loans are one of them. Take advantage of it as it's owed to you for your service.

The above thought got me thinking about VA loans themselves. I've heard many instances of Loan Officer trying to convince a VA borrower to buy using an FHA loan because they feel it's a better option or because they are "pretty much the same thing." While it could be say that VA loans are much like FHA loans it is important to realize that there are key differences that can make a big difference for qualifying veterans. While some guidelines are similar there are quite a few differences between the two programs. Let's start with the similarities and then we'll move in to some of the differences.

Like FHA's Up Front Mortgage Insurance Premium (UFMIP), VA loans have a funding fee. Both of these fees are allowed to be rolled in to the loan. For FHA, as of October 4^th 2010, the UFMIP is 1% of the loan amount. For VA loans, the funding fee depends on the down payment and rages from 2.15% to 1.25% of the loan amount.

Lastly, there are no fico requirements for either loan as required by their guidelines. That said, there is usually a fico score requirement implemented by the lender or investors that purchase these loans. That same rule applies to both of these loans. VA and FHA loans will contain "overlays" which are additional guidelines implemented by the lender that aren't necessarily required in either program. While you'll find that some lenders try to push the rules as FHA or VA rules, they are in fact that lender's rule.

Another similarity between the two is the eligibility for streamline refinances. Streamline refinances are opportunities by the buyer to refinance their property based solely on their mortgage payment history. Show me a borrower who is employed and has made their mortgage payment on time for the last two years and they'll be able to refinance without having to fully qualify again for the home loan.

While there are some similarities, there are plenty of advantages to using a VA loan. For example, I just mentioned you could get a VA loan with no down payment. Additionally, there is no monthly mortgage insurance on VA loans. Bear in mind that as of October 4^th, monthly mortgage insurance amounts have risen. When before we calculated it at .55% of the loan amount yearly, it is now at either .85% or .90% yearly which makes a big difference.

More guideline differences may apply. It's important to realize that VA loans are only for eligible veterans and it is in fact a benefit. If you are a veteran buying a primary residence, you owe it to yourself to explore the possibility of the benefit. Failure to do so may result in missing out on your benefit and paying more due to the mortgage insurance payment.

You may be eligible if one of the following applies:

You May Be Eligible If Any One of the Following are True:

• Served 181 days during peacetime (Active Duty)
• Served 90 days during war time (Active Duty)
• Served 2 years in armed forces
• Served 6 years in the Reserves or National Guard
• You are the spouse of a service member who was killed in the line of duty.

Hector Amendol a- Alterra Home Loans

Whittier CA