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FHA and VA loans: what is the difference?
May 25, 2023
Verified by
Jack Stick
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Both FHA and VA mortgages offer attractive advantages, including flexible lending guidelines, often competitive interest rates, and low down payments.
What is an FHA or VA mortgage?
FHA mortgages are guaranteed by the Federal Housing Administration (FHA) and are ideal for first-time homebuyers or those who do not qualify for conventional mortgages. In addition, creditworthiness and down payment requirements are less stringent.
VA mortgages are another type of government-insured mortgage. Guaranteed by the U.S. Department of Veterans Affairs (VA), they are available to active duty military, veterans and their spouses. The main advantage of a VA mortgage is that no down payment is required.
Comparison of FHA and VA mortgages
Anyone who is eligible for an FHA mortgage.
FHA loan
Active duty military, veterans and their spouses.
Primary residence
FHA loan
Primary residence
At least 3.5
FHA loan
No down payment required
Up to 500
FHA loan
No requirement, but lenders prefer scores of 620 or higher.
Up to 50
FHA loan
Up to 41
Initial and ongoing mortgage insurance premiums (MIP)
FHA loan
Initial financing costs
FHA loan rate
FHA loan
VA loan rate
Yes (up to 85%-95% LTV)
FHA loan
Yes (up to 100% LTV)
FHA loan
VA loan
Eligibility
Anyone who is eligible for an FHA mortgage.
Active duty military, veterans and their spouses.
Property type
Primary residence
Primary residence
Down payment
At least 3.5
No down payment required
Credit score
Up to 500
No requirement, but lenders prefer scores of 620 or higher.
DTI ratio
Up to 50
Up to 41
Current interest rate (30-year fixed-rate purchase)
FHA loan rate
VA loan rate
Refinancing with cash?
Yes (up to 85%-95% LTV)
Yes (up to 100% LTV)
Conditions for obtaining an FHA or VA loan.
Anyone who meets the solvency, down payment, and DTI ratio requirements can apply for an FHA loan for purchase or refinance. To qualify for a VA loan, you must be an active duty military member, veteran or military spouse. A certificate of eligibility (COE) is also required.
Down payment for an FHA or VA loan
The down payment for an FHA loan is at least 3.5 percent. If your credit score is between 500 and 579, a 10% down payment is required.
Credit requirements for FHA and VA loans.
VA loans do not require a minimum credit score. However, many VA lenders require a credit score of at least 620, so if your score is lower, your loan options may be limited. FHA allows a lower credit score: up to 580 (or 500 with a 10% down payment).
Mortgage insurance for FHA and VA loans.
With an FHA loan, even if you refinance, you pay an initial fee and a constant mortgage insurance premium. The idea is that, in case of default, the lender is reimbursed by the mortgage insurance fund.
Mortgage insurance is not paid for VA loans, whether purchased or refinanced. For both types of loans, you can choose to pay the costs separately or include them in the total cost of the loan.
Mortgage rates for FHA and VA loans.
Both loan programs can sometimes offer attractive rates. According to Empire Finance Pro, as of May 24, 2023, the average 30-year FHA rate was 7.23%, compared to 6.60% for a 30-year VA loan. The rate for a 30-year conventional loan is 7.08%.
Refinancing an FHA or VA loan.
If you meet the qualifying criteria, you can refinance an FHA or VA loan, or refinance another type of loan into one of these loan types, in order to reduce the interest rate, shorten the term of the loan, or obtain liquidity. Both programs include a "streamline" option that reduces administrative and underwriting formalities.
Which type of loan is right for you?
Although FHA loans are available to more borrowers, VA loans may be the best option if you qualify. You can qualify for a VA loan without a down payment, and interest rates are often lower than for FHA loans. If you do not qualify for a VA loan, an FHA loan may be a viable alternative if you do not qualify for a conventional loan.
