FHA vs. VA loans: What’s the difference, and which is better for you?

When comparing FHA and VA loans, the biggest differences come down to who qualifies and what you pay. An FHA loan is a government-insured mortgage available to most homebuyers with lower credit scores and a minimum 3.5% down payment, but it requires both upfront and ongoing mortgage insurance premiums. A VA loan is a benefit for eligible active-duty service members, veterans, and certain spouses with no required down payment and no monthly mortgage insurance, though a one-time funding fee typically applies. Here’s what you need to know about these two mortgage types when making a homebuying decision.

FHA loans vs. VA loans

Eligibility: FHA vs. VA loans

Anyone who meets the credit score, down payment and DTI ratio requirements can apply for an FHA purchase or refinance loan. To get a VA loan, you must be an active-duty member of the military, a veteran or military spouse. You’ll also need a certificate of eligibility (COE).

Property type: FHA vs. VA loans

Both FHA and VA loans can fund a purchase of a primary residence. Eligible property types include single-family homes, manufactured homes, condos, townhouses and multi-family properties of up to four units.

Down payment: FHA vs. VA loans

The minimum down payment for an FHA loan is at least 3.5%, but if your credit score is between 500 and 579, you’ll need a 10% down payment. By comparison, a VA loan can be obtained with no down payment.

Credit score: FHA vs. VA loans

The VA itself doesn’t have minimum credit score criteria. Many VA lenders, however, prefer credit scores of at least 620. If your score is lower, you might still be able to get a loan, but the terms will likely be less generous. The FHA allows lower credit scores, as low as 580 (or 500 with a 10% down payment).

Debt-to-income ratio: FHA vs. VA loans

Your debt-to-income ratio, or the amount of your gross monthly income divided by your monthly debt payment, is another critical qualification factor. The FHA allows a debt-to-income (DTI) of up to 43%, or up to 50% in some cases. The VA doesn’t set specific income requirements or debt thresholds for its mortgages, but many lenders prefer DTIs of 41% or less.

Mortgage insurance and fees: FHA vs. VA loans

With an FHA loan, even on a refinance, you pay an upfront and an ongoing mortgage insurance premium. The idea is that if you default on the loan, the lender is reimbursed from the mortgage insurance fund.

You don’t pay mortgage insurance with VA loan purchase or refinance loans. Instead, you pay an upfront funding fee based on your loan amount and your military service, as well as other factors.

With both types of loans, you can pay the fee separately or roll it into the total cost of the loan.

Mortgage rates: FHA vs. VA loans

In December 2025, the average rate for a 30-year FHA loan was 6.37%, lower than the 6.46% average rate for a 30-year VA loan, according to Bankrate.

In contrast, the average interest rate for a 30-year conventional loan was 6.34%.

Closing costs: FHA vs. VA loans

If you use an FHA loan, closing costs can run between 2% and 6% of the home’s purchase price. VA loans have closing costs, too, but they typically range from 1% to 6% of the loan amount. With a VA loan, you can negotiate that the seller pay all closing costs (and up to 4% of the home’s value) as a concession.

Loan limits: FHA vs. VA loans

FHA loan limits vary by property type and location, with different limits for low-cost and high-cost areas. For 2026, the FHA loan limits for single-family homes range from $541,287 in designated low-cost areas to $1,249,125 in high-cost areas.

As of 2020, veterans, service members and surviving spouses with a full remaining entitlement do not have a VA loan limit. VA loan limits only apply if you’ve already used some of your entitlement — meaning you have partial entitlement — and these limits vary by your county of residence.

Can you refinance FHA and VA loans?

If you meet the qualifying criteria, you can refinance either an FHA or VA loan, or refinance another type of loan into one of these types of loans, to lower your interest rate, shorten your loan term or tap your home’s equity. Both programs have a “streamline” option that minimizes paperwork and underwriting.

The VA allows veterans to convert a conventional mortgage into a VA loan with a VA cash-out refinance. It is a VA cash-out refinance. This type of refinance can be lengthy, involving nearly as much paperwork and review as a VA loan to purchase a home. Lenders will want to review your credit score, debt-to-income ratio and income. A home appraisal will also be required.

It is also possible to refinance a conventional mortgage into an FHA mortgage. The two options available are the FHA cash-out refinance and FHA 203(k).

Learn more:

• What is an FHA streamline refinance?

• What is a VA streamline refinance (VA IRRRL)?

Pros and cons of FHA vs. VA loans

FHA loans and VA loans each come with their own sets of pros and cons to weigh.

Pros and cons of FHA loans

Pros

• Low minimum down payment requirement of 3.5%
• Low minimum credit score requirements (580 with 3.5% down or 500 with 10% down)
• Likely easier to qualify for, meaning you can become a homeowner faster

Cons

• Loan limits cap how much you can borrow and vary depending on your home's location
• Has upfront and annual mortgage insurance premiums
• Must meet FHA's minimum property requirements to qualify

Pros and cons of a VA loan

Pros

• No down payment required
• No mortgage insurance
• Low closing costs
• Often charges lower interest rates
• No prepayment penalties if you pay off your loan early

Cons

• Must pay a required VA funding fee
• Less flexibility to waive certain contingencies, like a home inspection
• Limits to what type of property you can purchase (intended for primary residence)

Which works best for you: FHA loan or VA loan?

Deciding whether an FHA or VA loan is best for you will depend on your financial circumstances and needs. While FHA loans are accessible to a wider variety of borrowers, VA loans may be the better option for veterans because their terms are more generous. For instance, VA loans don’t require a down payment or mortgage insurance and usually have more lenient credit requirements, making it easier to qualify if you have a poor credit history or little cash.

Of course, there’s one big caveat: You must have a qualifying military service history (or be a military spouse) to be eligible for a VA loan.

If you don’t qualify for a VA loan — or even if you do — an FHA loan could be an appealing alternative. These mortgages can be easy to qualify for, given their low minimum down payment and credit score requirements. The application process is a tad quicker and less complicated — no need to get a COE — and you might find a bigger range of lenders to choose from.

Frequently asked questions

• What’s better as a first-time homebuyer, a VA loan or an FHA loan?

  It depends on your financial circumstances and whether you’ve completed military service (or are a surviving spouse) to qualify for a VA loan. For example, if your credit needs some work and would be a blocker to getting a mortgage for your first home, you might opt for an FHA loan. If you are an active-duty service member struggling to save up for a down payment to become a homeowner, you might opt for a VA loan to bypass the down payment requirement.

• Why would a seller not accept an FHA or VA loan?

  Unfortunately, some sellers may believe myths about FHA and VA loans, including the misconception that they take longer to close. In addition, properties must meet specific inspection and appraisal requirements for these loan types; if they don’t, sellers must pay for repairs for the sale to proceed. This could lead a seller to reject an FHA or VA loan, especially in a seller’s market with multiple offers.