Veterans and active-duty service members often qualify for both FHA and VA loans. Choosing the wrong one can cost thousands over the life of the loan. Here is the framework for making the right recommendation.
Down Payment
VA loans allow 0% down with no mortgage insurance. FHA requires 3.5% down at 580+ FICO (10% at 500-579) and charges an upfront MIP of 1.75% plus annual MIP of 0.55% for most loan terms and LTV configurations. For a borrower who qualifies for VA with full entitlement, the math strongly favors VA for any purchase where down payment conservation matters.
Funding Fee vs. MIP
VA has a funding fee (typically 2.15% for first use, 3.3% for subsequent use) but no ongoing mortgage insurance. FHA has 1.75% upfront MIP plus annual MIP that runs for the life of the loan on most configurations. For a 30-year loan, VA's one-time fee is usually less expensive than FHA's ongoing MIP over typical holding periods. Veterans with service-connected disability ratings of 10% or more are exempt from the VA funding fee entirely.
Credit Score Considerations
VA has no official minimum FICO from the agency, though most lenders impose overlays starting at 580-620. FHA has a 500 floor with 10% down. At the margins (FICO below 580), FHA may be the only option. Above 620, VA is almost always the financially superior choice for an eligible borrower.
Property Condition
Both programs have property condition requirements. VA MPRs (Minimum Property Requirements) and FHA MPS (Minimum Property Standards) are similar in scope. Pest inspections are more consistently required by VA.
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