If you or your spouse do not have the requisite military service background to qualify for a VA loan, you would have no other choice but an FHA loan. However, if you do have a military connection, you do not necessarily need to go with a VA loan. It might make more sense to go with an FHA loan in some cases. In your situation, it is important to know the difference between VA and FHA loans.
The first thing to know is that VA and FHA loans have different credit score requirements. A VA loan doesn’t technically have a minimum credit score limit, but an FHA loan does. If you fall below the minimum for a 3.5% down FHA loan, you may still qualify but with a 10% down payment. The next thing to know is that typically VA loans have a lower interest rate than FHA loans.
One thing many do not realize is that you don’t have to purchase a single-family home to get VA and FHA loans. You can get a multi-family property, provided you will occupy one of the units. You can go up to a four-unit property with an FHA loan. The same is true for VA loans if you purchase as a solo borrower, but you can go up to seven units with a joint borrower.
The loan limit also varies between VA and FHA loans, with VA loans allowing for a higher loan amount. You can go roughly $200,000 higher with a VA loan. You should also look at additional costs between the two. For example, VA loans have an upfront funding fee, and FHA loans require mortgage insurance with both an upfront charge and ongoing premiums, although you can eliminate that by putting at least 20% down.
The key to success is to have a firm understanding of only VA and FHA loans, but also other types of mortgages. At Harbor Mortgage Company, our team will guide you through the process so that you obtain the best mortgage for your situation and to fit your financial objectives now and in the future. Reach out today to learn more.