Home loans offered through the Federal Housing Administration and the Department of Veterans Affairs have a few similarities, but when it comes to benefits for veterans, the differences are plain to see.
Many people think that FHA loans and VA home loans are “government loans,” but this isn’t true. Although the loans are guaranteed by government agencies, they are issued through private FHA- and VA-approved lenders.
FHA loans offer individuals – typically those with low income, less-than-perfect credit or little savings – the chance to qualify for a loan with a small down payment. In some cases, borrowers are only required to put down 3 percent. As with a VA home loan, however, there are still credit and income requirements that borrowers must meet before they can get financing.
VA home loans do not require a down payment in most cases. Unlike FHA loans, a mortgage guaranteed by the Department of Veterans Affairs does not require private mortgage insurance, which can add hundreds or thousands of dollars to the cost of a home loan each year it is required. Additionally, VA sets limits on the amount veterans are required to pay in closing costs, which can save a significant amount of money.
Most servicemembers find that a VA loan offers advantages over FHA loan. What type of loan did you go with? VA or FHA?