VeteranPCS | Is a VA Loan Better than an FHA Loan?

 

If researching all the different loans available to home buyers isn’t as attention grabbing as the last season of Ozark, then I totally understand. Altho, lets be honest, Marty Byrd probably would have a field day in his plaid shirt reading all the caveats and the percentage points. And anything written by the government isn’t really making the best sellers list of great reads. They could have at least given us a powerpoint presentation we’re all used to. So, I’m going to try to make this as least painful as possible so you can understand the major differences that will help you find your better fit. Also, when in doubt, always have a very open and real conversation with your lender.

For the most part, any loan ending in an “A” is going to be backed by the government. That doesn’t mean they’re paying for your loan. It means they are insuring it. You are still required to make your monthly payments. The major differences with these 2 loans comes down to down payments and minimum credit scores. There are other factors and I will discuss some of those as well.

Let’s start with the VA loan. You’ve worked hard and have earned this. You will get a Certificate of Eligibility (COE) that will tell you what your entitlement is. It’s best to get this going from the beginning so that you will have that ready to hand over to your lender to speed up your lending process and also for your initial offer on properties. You can apply for that right online. The biggest appeal to the VA loan is that it requires NO down payment. The minimum credit score for a VA loan is usually 620. There can be loan limits applied, however with a 100% entitlement of your VA loan, there no longer is a limit and a partial entitlement will be determined by the county you’re buying in. Your VA loan may require a funding fee between 2.3-3.6%, unless you are a disabled Veteran with a 10% or higher rating, that funding fee can be waived.

Still with me? It’s like watching paint dry, I know. For the FHA loan, they require a 3.5% down payment. Your credit history and debt to income ratio is a little more lenient with the FHA loan. They will actually look at credit scores as low as 580. FHA loan limits may not be near as high as a VA Loan, maxing out at $420,680. Where the VA loan has a funding fee, the FHA loan actually requires insurance. You will pay a one time up
front insurance fee that will be tacked onto the actual loan and then another yearly fee for the life of the loan based on the balance of the loan.

With both loans, because the government is backing them, and we all know how the government cares about our health and safety…..your property will have to meet certain requirements in order to pass a home inspection. This seems scary. And home owners think that they will have to spend all their savings and potential profits on just being able to make a sale go through. But that’s not the case. Your realtor will be able to point out anything that may shake up an inspection, like peeling paint, or a missing handrail, or most importantly a shaky foundation. These loans don’t require the seller to provide you with a brand new home, they require that you are going to be safe and healthy living in this home. A knowledgeable realtor will guide you on how to maneuver that inspection and whether or not you wish to proceed with that purchase of that home or look elsewhere.

As with any major decision you make, you want to talk to experts. Reach out to your local lenders, search specifically for those who specialize in VA Loans. Your local lenders are going to know the ins and outs of all their local banks who offer loans and will be able to get you the best loan for your specific financial needs. Look for lenders who are offering military specials on their loans, some of these will have no funding fees!!!

For more information on the VA Loan visit the VA Website- CLICK HERE

Deana Allen military friendly real estate agent for veteranpcs

Written by:
Deana Allen
New York VeteranPCS Agent