subject: Buying a House: FHA Loan or VA Loan? [print this page] Are you planning to buy a house? If so, here are three major loan options you can consider.
FHA Loans FHA loans refer to Federal Housing Administration loans, housing loans that are offered by the Federal Housing Administration. These are targeted to lower income Americans who wish to purchase their own homes. The FHA (or technically, the US government) backs you up on the loan.
Requires a downpayment but keeps it at a minimal amount
Charges PMI fees
Charges a mortgage fee
Very strict on credit ratings
Charges closing costs but these are significantly lower that those charged by conventional loans
Amortization periods are shorter than in VA loans
VA Loans VA loans refer to Veteran Affairs loans, housing loans that are made accessible and guaranteed by the US Department of Veteran Affairs. These are open only to American veterans who wish to purchase a home meant as a primary residence. VA loans cannot be used to buy homes not intended for primary residence.
No down payment needed
No PMI charges
Charges a funding fee to maintain the VA loan program
Very lenient even with borrowers who have bad credit
Have long amortization periods sometimes longer than 30 years
Can reduce or completely eliminate closing costs from the borrowers' responsibility
Only open to military members (veterans, active duty, National Guard, and reserves)
Also open to un-remarried spouses of military members who died or became disabled while serving in the military
You can, however, get a second loan if you wish to upgrade to a new, bigger home in the future but only with these two conditions:
