Is a VA Loan an FHA Loan?
For many veterans, understanding which type of home loan to use to finance their purchase can be confusing. A VA loan is always an option, but you don’t have to use your benefit just because you can. In fact, sometimes it can be in your best interest to finance your house with a different type of loan, like an FHA loan.
If you’re new to mortgage applications, you’re probably wondering what the difference is or if, in fact, a VA loan is just another type of FHA loan. Here’s what you need to understand about your options.
A VA Loan Is Not an FHA Loan
VA loans are issued only to qualified veterans and current military members and are backed by the Veterans Administration. They’re completely separate from FHA loans, though their benefits are incredibly similar. Both loans offer more flexible qualifications and are more forgiving for borrowers with less established finances or poor credit scores.
If you apply for a VA loan, you’re using your benefit and can only take out another VA loan once you repay the first in full. However, you don’t have to worry about saving for a down payment on the home. The VA loan can be issued for the full amount of the home’s sale price, saving you the frustration of having to come up with thousands of dollars upfront.
How FHA Loans Work
FHA loans are designed to help low-income buyers buy a home they otherwise wouldn’t be able to afford. Like VA loans, they place less importance on your credit score and total annual income. However, FHA loans require a down payment to further secure the loan.
Buyers using this financing option must have at least 3.5 percent of the home’s sale price saved up before they can qualify for the loan. If you don’t have it, you won’t be able to qualify for the loan. Keep in mind that you can still use first-time homebuyers’ assistance programs to help you meet the down payment requirements.
Veterans Can Still Use FHA Loans
You’re not required to use a VA loan just because you’re a qualified veteran. If your mortgage broker things an FHA loan is in your best interest, you’re free to buy a home with one as long as you qualify for the loan.
Discuss Your Options Today
If you’re trying to decide between a VA loan and an FHA loan, contact us. Let us help you figure out which option is best for your situation.