VA home loans

VA loan vs FHA loan: which costs less for an eligible buyer

Veterans and service members who qualify for a VA loan sometimes end up with FHA because a lender suggested it or a credit score seemed borderline. The two programs charge for government backing in very different ways, and the difference can add up over the life of the loan.

Reviewed November 2026 · Written for Buy Home Tips from the sources listed below

Both VA and FHA loans are backed by the federal government, which is why lenders can offer them with small or no down payments. The backing is paid for differently. VA charges most borrowers a one-time funding fee and no monthly insurance. FHA charges an upfront premium and an annual premium paid monthly. For a buyer who qualifies for both, that difference usually decides the comparison.

Upfront government fee on a $300,000 loan with no down payment. VA first-use funding fee vs FHA upfront premium, from VA and HUD Mortgagee Letter 2023-05

Who can use each

VA loans are for eligible veterans, service members, members of the National Guard and Reserve who meet service requirements, and certain surviving spouses. You show eligibility with a Certificate of Eligibility. VA's purchase loan page says that, with full entitlement, you may not need a down payment as long as the sale price is not above the appraised value.

FHA loans are open to anyone who meets HUD's requirements, including credit, debt and occupancy rules. The minimum down payment is 3.5 percent with a credit score of 580 or higher.

How the costs differ

Cost	VA purchase loan	FHA purchase loan
Minimum down payment	None with full entitlement, if the price is not above appraised value	3.5% at 580 and above
Upfront charge	Funding fee, 1.25% to 3.3% depending on down payment and prior use	Upfront premium, 1.75% of the base loan
Monthly insurance	None	Annual premium, 0.50% or 0.55% for most loans over 15 years
How long monthly insurance lasts	Not applicable	11 years at 90% LTV or less, otherwise the loan term
Fee exemptions	Yes, including many disabled veterans	No

The VA rates come from VA's funding fee page. The FHA rates come from HUD Mortgagee Letter 2023-05 and apply to base loans up to $726,200 with terms over 15 years.

The funding fee and FHA's upfront premium can both usually be financed into the loan. That keeps cash to close down but adds to the balance.

Worked example: the same home both ways

Jordan is a first-time VA user buying a $310,000 home with a credit score in the 600s. He compares two options.

VA with nothing down. The loan is $310,000. The first-use funding fee of 2.15 percent is $6,665, which he finances. There is no monthly mortgage insurance.

FHA with 3.5 percent down. He brings $10,850 for the down payment. The base loan is $299,150. The upfront premium of 1.75 percent is $5,235.13, which he finances. Because his loan-to-value is above 95 percent, the annual premium is 0.55 percent, about $1,645 in the first year, or roughly $137 a month, and it lasts for the life of the loan.

The VA loan needs about $10,850 less cash to close and avoids roughly $137 a month in mortgage insurance at the start. If Jordan received VA disability compensation, he would likely be exempt from the funding fee, which widens the gap.

When FHA can still make sense

Your entitlement is tied up. If you have an existing VA loan or lost entitlement on a past loan, your remaining entitlement may limit how much you can borrow without a down payment. VA's loan limits page explains how that works.

You are buying with someone who is not eligible. A co-borrower who is neither your spouse nor another eligible veteran raises extra questions on a VA loan. Ask each lender how it would handle your situation; FHA may be simpler.

The lender's credit requirements differ. VA does not set a single minimum credit score, but lenders set their own. If one lender's VA minimum is above your score and another's FHA minimum is not, compare both before you assume VA is out of reach. Shopping a second lender is usually the better first step.

Property issues. Both programs have property standards. A home that fails one may fail the other, but repair requirements and timing can differ.

Questions to ask lenders

Can you quote both VA and FHA for the same price and down payment?
What is the total cash to close for each, including the funding fee or upfront premium?
What will my monthly payment be, including FHA's annual premium?
Am I exempt from the VA funding fee based on my Certificate of Eligibility?
If my entitlement is reduced, how much would I need to put down on a VA loan?

Get these answers as Loan Estimates so you can compare them line by line.

The bottom line

For a buyer who qualifies for both, VA usually costs less over time because it has no monthly mortgage insurance and may require no down payment. Weigh the funding fee against FHA's upfront and annual premiums, check whether you are exempt and compare Loan Estimates from more than one lender before deciding.

Comparing the two

Get your VA Certificate of Eligibility before you compare offers.
Check whether you are exempt from the VA funding fee.
Ask two lenders for Loan Estimates on both programs for the same home.
Compare the monthly payment including FHA's annual premium.
Compare cash to close, not just the down payment.
Think about how long you expect to keep the loan.

Questions buyers ask

Is a VA loan always cheaper than FHA?

Often, but not always. VA loans have no monthly mortgage insurance and may need no down payment, but most borrowers pay a one-time funding fee. FHA has an upfront premium and an annual premium. Compare full Loan Estimates for your situation.

How much is the VA funding fee?

For a first-use purchase loan with less than 5 percent down, VA lists 2.15 percent of the loan amount. It drops to 1.5 percent with 5 percent or more down and 1.25 percent with 10 percent or more. After first use, the rate with less than 5 percent down is 3.3 percent.

Who does not have to pay the VA funding fee?

VA lists exemptions, including people receiving VA compensation for a service-connected disability and certain others. Check VA's funding fee page and your Certificate of Eligibility.

Does FHA mortgage insurance go away?

Under HUD Mortgagee Letter 2023-05, for terms over 15 years the annual premium lasts 11 years if the starting loan-to-value is 90 percent or less, and the full mortgage term above that. With 3.5 percent down, it lasts as long as the loan.

Sources checked for this page

Checked November 2026. Programs and limits change; confirm with the source before you rely on a figure.