FHA and VA Loans
Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans are popular homebuyer choices. These loans must meet certain requirements.
FHA loan
- Low down payment options
- Available for a variety of loan terms
- Typically requires mortgage insurance
Features
- Available in a variety of fixed-rate and adjustable-rate loan options
- Has down payment options as low as 3.5%
- May allow you to use a gift or grant for all or a portion of the down payment or closing costs
- You typically have to pay upfront and monthly FHA Mortgage Insurance premiums
Benefits
- Requires less cash upfront for your down payment and closing costs
- Available for all income levels
- Allows a new buyer to take over the loan if you sell your home (subject to loan approval)
- Allows a co-applicant to help you qualify even if the person doesn't live in the home
Considerations
- FHA loans have the benefit of a low down payment but there are other loan products with the same option
- Be certain to ask your home mortgage consultant to help you compare the overall costs of all products, including the monthly and long-term costs and conditions of the required mortgage insurance
- You can typically only have one FHA mortgage at any given time
- In many instances, you may find FHA to be a more expensive financing option and should be considered after thoroughly evaluating all other product options that meet your credit qualifying and financial needs
VA loan
- Financing for eligible service members
- No-down-payment options available
- One-time VA funding fee typically required
Features
- Provides financing for qualified veterans, reservists, active duty personnel, or eligible family members
- Available in a variety of fixed-rate and adjustable-rate loan options
- Has low- and no-down payment options
- Allows closing costs to come from a gift or grant
Benefits
- Provides a wide range of rate, term and cost options
- Doesn't require monthly mortgage insurance
- Provides the potential for minimal out-of-pocket expenses with seller contributions
Considerations
- You typically have to pay a one-time VA Funding Fee that can be financed into the loan amount
- You can get financing for your primary residence only