Buying a house is a major financial decision, and the type of mortgage you choose can affect your long-term costs and affordability. For many buyers, qualifying for a conventional loan can be difficult, especially if you don’t have a large down payment saved or your credit score isn’t perfect. Fortunately, government-backed mortgage programs can be your path to homeownership.
Two of the most popular options are FHA loans and VA loans. While both are designed to make homeownership more accessible, they serve different groups of people and come with unique benefits and requirements. Understanding the differences between an FHA vs. VA loan can help you figure out which option best fits your financial situation and homeownership goals.
What is an FHA loan?
An FHA loan is a type of mortgage guaranteed by the Federal Housing Administration. It’s ideal for first-time home buyers and borrowers with less-than-perfect credit or low down payments. Because the government backs FHA loans, lenders offer more flexible requirements. FHA loans are widely available through private lenders, including banks, credit unions, and online lenders.
What is a VA loan?
A VA loan is a mortgage backed by the Department of Veteran Affairs. It’s available exclusively to eligible service members, veterans, and surviving spouses. Because the VA guarantees part of the loan, lenders offer benefits that aren’t available with most other mortgage programs.
FHA vs. VA loans
The key difference between FHA and VA loans is that FHA loans are for borrowers who may not meet the strict requirements of conventional loans, while VA loans are exclusively reserved for service members, veterans, and spouses.
Here’s a quick comparison of FHA vs. VA loans:
| FHA loan | VA loan | |
|---|---|---|
| Eligibility | Open to anyone who meets the FHA loan requirements | Active-duty service members, veterans, and spouses |
| Down payment | As low as 3.5% | No down payment required |
| Minimum credit score | As low as 500 | No requirement, but lenders prefer a score of at least 620 |
| Debt-to-income ratio | Not more than 43% but can go as high as 50% | Not more than 41% |
| Property type | Primary residence | Primary residence |
| Loan limits | $524,225 to $1,209,750 | No limits with full VA entitlement |
| Mortgage insurance & fees | Upfront and ongoing mortgage insurance premiums | Upfront VA funding fee |
| Closing costs | 2% to 6% | 1% to 6% |
Eligibility
FHA loans are available to all borrowers who meet the minimum credit score, down payment, and debt-to-income ratio requirements. To qualify for a VA loan, you must be an active-duty member of the military, a veteran, or a surviving spouse. Borrowers must obtain a certificate of eligibility (COE) from the VA.
Down payment
The minimum down payment for FHA loans is 3.5% for borrowers with a credit score of at least 580. For those with scores between 500 and 579, the minimum down payment is 10%. If saving for a down payment is a concern, you might also want to explore loans that require 10% down or less. VA loans, on the other hand, require zero down payment.
Credit score
You can qualify for an FHA loan with a credit score as low as 500, but you must put 10% down. You need a score of 580 or higher for a 3.5% down payment. The VA itself doesn’t set a minimum credit score requirement, but lenders typically want to see at least a 620.
Debt-to-income ratio
The maximum debt-to-income (DTI) ratio for FHA loans is 43%. However, some lenders allow up to 50% if you have strong compensating factors, like a large down payment.
The VA doesn’t set the maximum DTI ratios for borrowers. Most lenders require applicants with a DTI ratio of more than 41% to undergo an in-depth assessment to ensure their income is enough to cover living costs after paying their mortgage and other debts.
Property type
You can use both FHA and VA loans to purchase or refinance primary residences. The property must meet the standards set by the Department of Housing and Urban Development (HUD) for an FHA loan and the Department of Veteran Affairs for a VA loan.[1]
If you’re looking to downsize later in life, you may want to read this guide on buying a house at 65 to see what factors matter the most.
Loan limits
FHA loan limits vary by county.[2] In 2025, you can borrow anywhere from $524,225 to $1,209,750 for single-family homes.
VA loans don’t have limits if you have full VA entitlement. VA loan limits apply if you have other active VA loans or previously defaulted on a loan. The limits mirror the guidelines set by the FHA for conforming loans, which are between $806,500 and $1,209,750.[3]
Mortgage insurance and fees
FHA loans require an upfront mortgage insurance premium (UFMIP), typically 1.75% of the loan amount, and ongoing MIP over the life of the loan. You can only cancel your MIP once you’ve paid your mortgage in full, unless you made a down payment of at least 10%. In that case, you’ll be able to cancel the MIP after 11 years.
VA loans don’t require mortgage insurance, but you’ll pay a one-time VA funding fee, ranging from 1.25% to 3.3% of the loan amount. You can pay the fee upfront or roll it into your mortgage.
Closing Costs
Like any other type of mortgage, both FHA and VA loans have closing costs. For FHA loans, your closing costs can be anywhere from 2% to 6% of the home’s purchase price. For VA loans, closing costs range between 1% and 6%.
Pros and cons of FHA vs VA loans
FHA and VA loans have upsides and downsides worth weighing.
Pros and cons of FHA loans
Pros
- Low credit score requirement
- Down payment as low as 3.5% for scores 580 and higher and 10% for scores between 500 and 579
- Flexible DTI requirements
- Assumable mortgage
Cons
- Has upfront and ongoing mortgage insurance premiums
- Loan limits, which can limit purchasing power
- Stricter property standards (must meet the minimum FHA property standards)
- Can only finance primary residences
Pros and cons of VA loans
Pros
- No down payment required
- No mortgage insurance
- Often charges lower interest rates
- No prepayment penalties if you pay off your loan early
Cons
- One-time VA funding fee
- Property restrictions
- Eligibility is limited to service members, veterans, and their spouses
Which loan is right for you?
Deciding whether an FHA or VA loan is right for you depends on your needs and eligibility.
If you qualify for a VA loan, it always offers better terms and benefits than an FHA loan. The ability to buy a home with no down payment, no monthly mortgage insurance, and often lower interest rates makes a VA loan the most attractive mortgage option available. Over time, these benefits can save you thousands of dollars.
However, not everyone meets the VA loan requirements. If you’re not eligible, an FHA loan can still be a great alternative, especially if you don’t have a large down payment saved and your credit score isn’t in good standing. They’re especially useful for:
- First-time home buyers who need a low barrier to entry
- Borrowers working on rebuilding their credit
- Those who want to use gift funds for their down payment and closing costs.
If you qualify for both, a VA loan is usually a smarter choice. The lack of mortgage insurance alone is a major advantage, and the lower upfront costs can make your monthly payments much more manageable. The biggest downside is the VA funding fee. But in most cases, it’s still far less expensive than FHA mortgage insurance premiums over time.