FHA Loans — Federal Housing Administration
FHA loans are insured by the Federal Housing Administration, allowing lenders to offer more flexible qualification criteria. First introduced in 1934 to stimulate housing market activity, FHA loans remain the primary vehicle for first-time buyers and those with limited savings or credit history.
- Minimum 3.5% down payment with a credit score of 580+
- 10% down payment accepted for scores 500–579
- DTI limits — Front-end 31% / Back-end 43% (up to 57% with strong compensating factors)
- MIP (Mortgage Insurance Premium) — 1.75% upfront + annual 0.55–1.05% depending on term and LTV
- Loan limits — $524,225 standard; $1,149,825 high-cost areas (2026)
The FHA MIP Trap
Unlike conventional PMI which cancels at 80% LTV, FHA MIP is typically paid for the life of the loan (for loans originated after June 2013 with <10% down). On a $350K loan at 0.55% annual MIP, that's $1,925/year for 30 years — $57,750 in total MIP. Refinancing into a conventional loan once LTV reaches 80% is often the optimal exit strategy.
VA Loans — Department of Veterans Affairs
VA loans are guaranteed by the Department of Veterans Affairs for eligible veterans, active-duty service members, National Guard, and qualifying surviving spouses. They offer the most favorable terms available in the US mortgage market for those who qualify.
- No down payment required — 100% financing on primary residences
- No PMI — The VA guarantee eliminates private mortgage insurance entirely
- No loan limits — VA-eligible borrowers can finance any amount; lenders may still have overlays
- VA Funding Fee — One-time fee of 1.25–3.3% of loan amount (varies by use and down payment); exempt if receiving VA disability compensation
- Credit — VA sets no minimum but most lenders require 620+
For eligible veterans, VA loans almost always outperform FHA: no down payment, no PMI, lower rates, and no lifetime insurance cost. The VA funding fee is a one-time upfront cost vs decades of FHA MIP payments.
FHA vs VA — Side-by-Side
| Feature | FHA | VA |
|---|---|---|
| Down Payment | 3.5% (580+ score) | 0% |
| Insurance/Guarantee | Lifetime MIP | Funding fee (once) |
| Min. Credit Score | 580 | 620 (lender overlay) |
| Loan Limits | $524,225 standard | No limit |
| Occupancy | Primary only | Primary only |
| Property Standards | Strict (FHA appraisal) | Must pass VA appraisal |
| Eligibility | Anyone | Veterans / service members |
| Typical Rate vs Conventional | +0.1–0.3% | –0.1–0.2% |
