You’ve found the house, run the affordability numbers, and now the question is simple: VA loan vs FHA loan. Which mortgage should you choose? Both loans help people buy homes with low down payments, but they serve different borrowers in very different ways. The wrong choice could cost you tens of thousands of dollars in interest and insurance premiums over the life of the loan, so it’s worth a close look before you commit.
The Short Answer: VA vs FHA at a Glance
- VA loans: zero down payment, no monthly mortgage insurance, and usually lower interest rates. Only eligible service members, veterans, and certain surviving spouses can use them.
- FHA loans: down payment as low as 3.5% with a 580 credit score, but you pay monthly mortgage insurance premiums (MIP) for years. Open to any creditworthy buyer.
You can probably guess which one is cheaper on paper, but the details are sneakier.
VA Loans Explained
VA loans don’t come from the Department of Veterans Affairs. The VA guarantees part of your loan, which lets private lenders offer you better terms. That guarantee is why you’ll find no down payment requirement, no PMI, and interest rates that are typically a quarter to half a percent lower than FHA.
Who Qualifies for a VA Loan?
You’re eligible if you’re on active duty and have served 90 consecutive days, a veteran with an honorable discharge, a member of the Guard or Reserve with six years of service, or a surviving spouse of a veteran who died from a service-connected disability. You’ll also need a current Certificate of Eligibility (COE). The easiest way to get one is through eBenefits.va.gov, and it takes about 10 minutes.
The Funding Fee Is Not Mortgage Insurance
VA loans don’t have a monthly insurance premium, but they come with an upfront funding fee. For first-time users with zero down, that fee is 2.3% of the loan amount. Put 5% down and it drops to 1.65%; put 10% down and it’s 1.4%. If you use a VA loan a second time, the no-down-payment fee jumps to 3.6%. You can finance the fee into the loan, so you don’t need to pay it out of pocket. If you have a service-connected disability, the funding fee is waived completely.
FHA Loans Explained
FHA loans are insured by the Federal Housing Administration. Because the government covers the lender’s losses, you can qualify with a lower credit score and a smaller down payment than you’d need for a conventional loan.
The Real Cost of MIP
FHA insurance arrives in two layers: an upfront fee and a monthly fee. The upfront mortgage insurance premium (UFMIP) is 1.75% of the base loan amount, and most people fold it into the loan. Then you pay an annual MIP that ranges from 0.15% to 0.75%, depending on your loan-to-value ratio and term. For a 30-year loan with 3.5% down, the annual MIP is about 0.55%. On a $350,000 loan that works out to roughly $160 a month. Here’s the trap: with less than 10% down, that MIP stays for the entire loan term. It never goes away just because you reach 20% equity. The only way to ditch it is to refinance into a different mortgage.
Loan Limits and Credit Scores
FHA lets you in with a credit score as low as 580 if you can put 3.5% down, and 500 with a 10% down payment. Loan limits go by county. In 2025, the standard limit for most areas is $503,750, but high-cost counties have limits up to $1,209,750. Always check the FHA limit map for your zip code.
Head-to-Head: VA vs FHA by the Numbers
- Down payment: VA needs $0. FHA needs at least 3.5% (or 10% if your credit is below 580).
- Credit score: VA lenders usually want 620 or higher. FHA accepts 580, and even 500 with 10% down.
- Mortgage insurance: VA has no monthly PMI. FHA charges MIP that can last the life of the loan.
- Upfront funding fee: VA charges 1.4% to 3.6% (waived for disabled veterans). FHA charges 1.75% upfront plus the monthly MIP.
- Loan limits: VA has no national cap if you have full entitlement. FHA is capped by county.
A Real-World Monthly Cost Comparison
Let’s run the numbers on a $350,000 house in a typical Texas county, assuming a 640 credit score and a 30-year fixed rate. You qualify for both loans.
- VA loan: $0 down. The 2.3% funding fee adds $8,050 to the balance, so you start at $358,050. At a 6.25% rate, your principal and interest payment is about $2,205. No mortgage insurance.
- FHA loan: 3.5% down is $12,250. After the 1.75% upfront MIP of $5,910, your financed amount is $343,660. At a 6.75% rate, principal and interest is about $2,229. Add $155 a month for the annual MIP, and your total payment hits $2,384.
The VA loan saves you about $179 every month. Over five years, that’s $10,740 in your pocket, and you never had to tie up $12,250 in a down payment. Remember, these numbers assume a typical VA funding fee and no disability exemption. If the funding fee is waived, the VA loan looks even better.
When FHA Beats VA (and Vice Versa)
FHA is the clear fallback for borrowers who don’t qualify for a VA loan, or who have a credit score in the 500s. VA lenders rarely approve scores below 620, and many want 640. If you have a 570 score with 10% down, FHA is often the only low-down-payment game in town. That alone makes FHA the right call for a large group of buyers.
But if you can get a Certificate of Eligibility, the math usually points to VA. Even a modest $179 monthly savings adds up to serious money. VA loans also don’t require you to pay the funding fee if you have a disability rating, and the IRRRL refinance option lets you lower your rate later with no appraisal and no income verification. That’s a level of flexibility FHA’s streamlined refinance doesn’t quite match.
Three Action Steps Before You Commit
- Get your Certificate of Eligibility. Before you compare quotes, pull your COE from eBenefits.va.gov. It’s free, it takes minutes, and it tells you exactly which funding fee you’ll pay.
- Request loan estimates from both loan types. Ask two lenders, one experienced with VA and one experienced with FHA, to send you a Loan Estimate. Look at the interest rate, closing costs, and the monthly payment for the same house price.
- Run the numbers based on how long you’ll stay. The funding fee and MIP have different break-even timelines. If you’re moving in four years, pay attention to upfront costs. If you’re staying a decade, monthly savings matter more.
Once you see the numbers side by side, the right choice often becomes obvious. Get your pre-approval, keep your options open, and choose the mortgage that leaves the most money in your bank account every single month.