The VA Loan And The FHA Loan: What's The Difference?

Mortgage and Lending with Integrity Mortgage Group

VA loans and FHA loans are considered government loan products. FHA loans are those that are insured by the Federal Housing Administration, a branch of the government. VA loans are guaranteed by the Veterans Benefits Administration, a subdivision of the Department of Veterans Affairs. Many times you will hear these referred to as government loans, but this is not technically an accurate statement. The government does not issue the loans themselves, but rather provides a guarantee or insurance to the lenders that do lend to borrowers. While these two loans are both backed by the government, there are significant differences between the two.

FHA Loans

FHA loans are often utilized by individuals who have a lower income, imperfect credit, or are buying their first home. It may be easier for an individual to qualify for this type of loan than for a conventional or traditional loan. An FHA loan will have a mortgage insurance premium included in the monthly payment and also has an up front insurance premium. It is necessary to meet the guidelines set forth by the FHA program to obtain this type of loan. Some borrowers are able to obtain an FHA loan with a small down payment (usually as low as just three percent).

VA Loans

VA determines the guidelines for who is eligible to obtain the loan. You must be a veteran to qualify and you must have been honorably discharged from service, or currently be serving, or be an active reservist with certain minimum service requirements. Just like the FHA loan, there are income and credit guidelines for obtaining a VA home loan. Some borrowers qualify for a VA loan even though they didn't qualify for a conventional loan. This loan can help those who are struggling to get a conventional loan due to lower income, some minor credit problems, or being a first-time homebuyer.

There are additional benefits to the VA loan. For example, you do not have to have any down payment when securing this type of loan. With many other types of loans, you have to pay PMI, or mortgage insurance, which protects the lender in case of default. This is not required on a VA home mortgage loan. There are strict guidelines that are followed regarding closing costs and origination fees, which can make the loans more affordable than other types of loans.

The difference in these loans is significant. It's important to consider options carefully. Government backed loans have put many borrowers on a successful path to home ownership.

Comments (1)

Pat Champion
John Roberts Realty - Eustis, FL
Call the "CHAMPION" for all your real estate needs

Great explanation on the difference of the VA and FHA loan it is good for buyer's to know the difference so they can make an educated choice on which one is best for them.

Jan 23, 2012 09:00 AM