FHA and VA loans are both good options for homebuyers because of their competitive interest rates, flexible credit qualifications, and low down payment requirements. Both loans are backed by the federal government. FHA loans are backed by the Federal Housing Administration and VA loans are backed by the Department of Veterans Affairs. Show
There are important differences between FHA loans versus VA loans. FHA loans are available to all U.S. citizens who qualify while VA loans are only available to veterans, active duty military personnel, and surviving spouses who meet the eligibility requirements. FHA loans have low down payment requirements while VA loans allow many borrowers to buy a house without a down payment. Finally FHA loans have upfront and monthly mortgage insurance premiums while VA loans just have a one-time VA funding fee. Keep reading to find out more about the advantages and disadvantages of FHA loans versus VA loans, and decide which one might work better for you! About FHA loansFHA loans are offered by private lenders like Freedom Mortgage and are insured by the Federal Housing Administration ("FHA"). FHA loans make it easier for you to buy a home when you have fair credit, a moderate income, or less money for a down payment. Because the FHA backs these mortgages, private lenders are able to offer home loans to more borrowers. What are the advantages of an FHA Loan?
FHA loans are good for first-time homebuyers but you can use them to purchase your next home too. If you currently have an FHA loan, you can also take advantage of the FHA streamline refinance program to lower your interest rate. Streamline refinances feature easier credit and income requirements and no loan-to-value ratio limits, so you can refinance even if you have little equity in your home. You won’t need a new home appraisal either, and you can close quickly on your new loan. What are the disadvantages of FHA loans?
About VA loansVA loans are also government-backed and make it easier for military personnel to buy and refinance homes. Unlike FHA loans, VA loans are only available to veterans, active-duty military personnel, and surviving spouses who qualify. What are the advantages of a VA Loan?
VA loans also have a streamline refinance program which is also called VA IRRRL refinancing. This program lets you get a lower rate on a new VA loan with easy credit qualifications, less paperwork, and faster closing. What are the disadvantages of VA loans?
Learn more about FHA and VA loansFreedom Mortgage was the #1 FHA lender and #1 VA lender in the United States in 2021.1 You can use an FHA or VA loan to purchase or refinance a home. By refinancing, the total finance charges may be higher over the life of the loan. Our friendly Loan Advisors are happy to talk to you about your loan options! Complete our Get Started form or call us at 877-220-5533. 1 Inside Mortgage Finance, 2021 Which is a better loan FHA or conventional?A conventional loan is often better if you have good or excellent credit because your mortgage rate and PMI costs will go down. But an FHA loan can be perfect if your credit score is in the high-500s or low-600s. For lower-credit borrowers, FHA is often the cheaper option.
Why do sellers prefer conventional over FHA?Sellers often prefer conventional buyers because of their own financial views. Because a conventional loan typically requires higher credit and more money down, sellers often deem these reasons as a lower risk to default and traits of a trustworthy buyer.
What is the advantage of an FHA loan over a conventional loan?FHA Loan: Pros
Low down payments of as little as 3.5% of the home's purchase price. Low closing costs. Buyer minimum credit scores that are lower than required by conventional mortgages. Higher debt-to-income ratio than allowed by conventional mortgages.
Is it better to go VA or conventional loan?If you are eligible, a VA loan is often better than a conventional loan. You can buy a home with no down payment, a higher debt-to-income ratio, and no private mortgage insurance. You're also likely to have a lower mortgage rate and cheaper monthly payments. Those perks are hard to beat.
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