There are distinct differences between VA loans and FHA loans. Both government-based mortgage loans are designed to make buying a home for the first time an easy process. Learn the differences and to decide which is best for you.
The Features of VA Loans
VA loans require no down payment and are available to Veterans, those that serve in the military, and certain spouses of military personnel. These are guaranteed by the Department of Veterans Affairs in the United States and are issued by private-based lenders. The following outlines the features associated with these loans:
- Does not require private mortgage insurance
- Some require a funding fee that ranges between .5% and 3.3%
- The qualifying standards are minimal
- Closing costs are considered to be flexible
- Eligibility may be possible through benefits issued by the VA
- The seller may be required to pay up to 4% in concession fees
The Features of FHA Loans
FHA loans are insured by the Federal Housing Authority in the United States and are considered to be mortgages that are backed by the government. These loans typically require lower credit scores and lower amounts to be put down than other types of loans for buying a home. The following outlines the main features of the FHA loans that are currently available:
- The minimum down payment for this type of loan is typically 3.5% of the total cost
- The mortgage insurance payment of at least 1.75% must be paid upfront
- Most FHA loans require premiums to be paid on the mortgage insurance for a total of 5 years
- The closing costs are considered to be flexible
- Sellers may have to pay up to 3% in concession fees
- Owner occupancy
The Down Payment
According to the guidelines of both of the loans, those pertaining to the amount that must be put as a down payment is what truly sets the two types of loans apart. In terms of loan limits, the VA loans typically max out at a total of $417,000. There is no max out rate for the FHA loans; however, each loan that is acquired will be required to have a total of 3.5% in cash to put down. This means that a VA loan of $417,000 will have a $0 down payment and an FHA loan of the same amount will require a total of $14,595 to be put down on the home that is being purchased. In addition to this, the individual getting an FHA loan will be required to pay for private mortgage insurance, but the person getting a VA loan will not have to pay for private mortgage insurance.
Get Approved Today
Whether you have an interest in a VA loan or an FHA loan, we here at Somerville Bank can help you get approved today. All it takes is minimal paperwork and minimal requirements. Visit us at one of our 7 locations.
These include our Ohio Locations: North Eaton, South Eaton, Somerville, Camden, Oxford, Hamilton, and the Mortgage Center in Richmond Indiana.
For more information, simply contact one of our friendly staff and we will be more than happy to assist you.