If you’re a first-time homebuyer considering a VA loan vs FHA loan, you may wonder which loan is right for you. Both home loans are a popular option for first-time buyers.
You must be a military member, veteran, or a surviving spouse to qualify for a VA loan. Meanwhile, FHA loans are available to any borrower who meets the eligibility requirements.
We'll explain the key differences between a VA loan vs FHA loan so you know what to expect.
...in as little as 3 minutes – no credit impact
VA vs FHA loans
What are FHA and VA loans? They're government-backed home loans that can provide a more affordable path to homeownership. Government-insured loans like VA and FHA loans are less risky for lenders. That means they typically offer more competitive rates and loan terms, and less stringent credit requirements.
The U.S. Department of Veterans Affairs insures VA loans. Two standout features of VA loans are that they don't require a down payment or mortgage insurance fees.
Meanwhile, FHA loans are insured by the Federal Housing Administration. These loans have lower minimum credit scoreand down payment requirements than conventional loans.
Better offers FHA loans and VA loans with competitive rates and provides a simple application process.
Eligibility
VA loan vs FHA loan eligibility requirements differ. FHA loans are accessible to any buyer who meets the credit score, DTI ratio, and down payment requirements.
VA loans are more restrictive. To be eligible for a VA loan, you must be an active-duty military member, veteran, or surviving military spouse.
Down payment
FHA loans require borrowers to make a down payment of at least 3.5%. For those with a credit score of 580 or higher, the minimum down payment is 3.5% of the home’s purchase price. Those with credit scores between 500 and 579 must make a 10% down payment.
For most borrowers, there are no minimum down payment requirements for a VA loan.
Credit score
The minimum credit score for an FHA loan is 500. There’s no official minimum credit score needed to qualify for a VA loan. However, most lenders require a credit score of at least 620.
Interest rates
Since FHA loans and VA loans are government-insured home loans, lenders tend to offer more competitive interest ratesand loan terms compared to conventional home loans.
Remember: your financial situation and credit score can influence the interest rate you qualify for when applying for a home loan.
Related: Current VA loan rates
Property type
Both loans are intended to finance a primary residence where the borrower lives. This can include a single-family home, a multi-family property (up to four units), a manufactured home, or new construction home.
VA and FHA loans have strict property standards to ensure that a home is safe, secure, and structurally sound. For an FHA loan, the property must meet minimum standards set by the Department of Housing and Urban Development. For a VA loan, the property must meet the minimum requirements set by the Department of Veterans Affairs.
Debt-to-income (DTI) ratio
Many lenders require FHA loan applicants to have a DTI of 43% or less. But lenders may approve an applicant with a DTI above 43% in some cases. At Better Mortgage, there are circumstances where a DTI ratio of up to 57% is allowed.
The VA suggests an ideal DTI ratio of 41% or less for VA loans. If you have a higher DTI, you'll face more scrutiny during the application process.
Closing costs
FHA loan borrowers can generally expect to pay closing costs totaling between 2% to 6% of the home’s purchase price. VA loan borrowers should also prepare to pay closing costs, which typically range from 3% to 6% of the home’s purchase price.
Loan limits
FHA loan limits vary by location. For 2025, the loan limits are $524,225 for borrowers in most counties and $1,209,750 for borrowers in high-cost counties.
There are no VA loan limits for veterans with full entitlement. For borrowers with partial entitlement, county-based loan limits may apply.
Mortgage insurance and fees
FHA loan borrowers pay an upfront mortgage insurance premium (UFMIP) and annual mortgage insurance premiums(MIPS).
A UFMIP of 1.75% of the loan amount, is paid at closing or rolled into the loan amount. Meanwhile, annual MIPs are included in your monthly mortgage payment. Factors like the down payment amount, loan-to-value ratio, and loan amount influence your annual MIPs. But you can expect to pay anywhere from 0.15% to 0.75% of the loan amount each year.
VA loans don't require borrowers to pay private mortgage insurance (PMI) or other ongoing mortgage insurance. However, borrowers must pay a one-time VA funding fee, ranging from 1.25% to 3.3% of the loan amount, at closing. This fee can be financed into the loan.
...in as little as 3 minutes – no credit impact
Refinancing VA and FHA loans
VA loans and FHA loans can be refinanced.
Since these home loans are government-backed, they qualify for a streamlined refinancing process, which can reduce paperwork and result in faster processing.
You can streamline refinance an existing FHA loan into a new FHA loan or streamline refinance an existing VA loan into a new VA loan.
Alternatively, borrowers can refinance a VA loan or FHA loan to a conventional loan. You must meet eligibilityrequirements for the new loan and lender.
VA loan vs. FHA loan pros and cons
Is a VA loan better than an FHA loan? To decide whether a VA loan or FHA loan is best for you, it’s beneficial to consider the advantages and disadvantages of each loan type.
Let’s review some of the top pros and cons.
Pros and cons of VA loans
Here are some VA loan pros and cons to consider:
Pros
Cons
No down payment for most borrowers
Must pay VA funding fee
No private mortgage insurance
Strict property standards and appraisal requirements
Tend to have lower interest rates
Extended closing time
No loan limits for most borrowers
Pros and cons of FHA loans
Here are some FHA loan pros and cons to consider:
Pros
Cons
Lower credit score requirements than conventional loans
Must pay upfront and annual mortgage insurance premiums
Low minimum down payment requirements
Limitations on borrowing amounts
May be easier to qualify compared to a conventional loan
Strict property standards and appraisal requirements
Less strict DTI ratio requirements
Extended closing times
Choosing between FHA and VA loans
Still unsure whether a VA vs FHA loan is right for you? Your ideal home loan will depend on your financial situation and needs. If you're eligible, a VA loan may be the best fit. Perks like no down payment and no mortgage insurance could provide significant savings.
An FHA loan may be ideal if you have a low credit score or are building your credit. Before deciding between VA vs. FHA loans, shop around and compare loan options. Better can help you compare VA vs FHA loan options.
VA vs FHA loan FAQs
Is a VA or an FHA loan a better option for a first-time homebuyer?
A VA loan or FHA loan can be an excellent option for first-time homebuyers. However, your personal situation and finances will determine which home loan option is the best fit for you. An FHA loan may be a more ideal option for someone working to build their credit. A VA loan may be a suitable option for individuals struggling to save for a down payment.
Why might a seller decline an FHA or VA loan?
A seller might decline an offer from a buyer with an FHA or VA loan due to stricter property and appraisal requirements, as well as the potential for repairs needed to close and longer closing times.
Conclusion
For eligible borrowers, VA loans and FHA loans can make homebuying more affordable.
For active-duty military members and veterans, a VA loan offers benefits such as $0 down payment, no mortgage insurance premiums, and favorable interest rates.
FHA loans are also an attractive home loan option to explore due to low minimum credit score requirements, low minimum down payment requirements, and competitive interest rates.
Better offers tools that make it easy to compare FHA vs. VA loans fast, check $0-down VA options, and lock in a rate.
...in as little as 3 minutes – no credit impact