What Are FHA and VA Loans?
FHA and VA loans are mortgages backed by a federal agency, which lowers the lender’s risk and lets lenders offer easier terms. FHA loans are insured by the Federal Housing Administration, and VA loans are guaranteed by the U.S. Department of Veterans Affairs. You still apply through a lender or broker, and you must meet the lender’s income, credit and property requirements.
Quick Facts
| Question | FHA loans | VA loans |
|---|---|---|
| Who backs the loan? | Federal Housing Administration | U.S. Department of Veterans Affairs |
| Who qualifies? | Most buyers who will live in the home | Eligible veterans, service members and some surviving spouses |
| Minimum down payment | 3.5% with a 580 credit score | Often 0% |
| Mortgage insurance | Upfront and annual premiums | None, but a one-time funding fee usually applies |
| Credit flexibility | High; our FHA Advantage Program lists scores as low as 550 | Set by each lender, with no VA minimum score |
| Property use | Primary residence | Primary residence |
How Do FHA, VA and Conventional Loans Compare?
FHA suits buyers with smaller down payments or lower credit, VA suits eligible veterans and service members, and conventional suits borrowers with strong credit and savings. This table shows the main differences.
| Feature | FHA | VA | Conventional |
|---|---|---|---|
| Down payment | 3.5% with a 580 score | Often 0% | As little as 3% on some programs |
| Credit | Flexible | Lender-set | Commonly 620 or higher |
| Mortgage insurance | Upfront and annual premium | None | Private mortgage insurance under 20% down |
| One-time fee | Upfront premium | VA funding fee | None |
| Who qualifies | Most owner-occupant buyers | Veterans and service members | Most borrowers |
| Best for | Smaller down payment, lower credit | Eligible military borrowers | Strong credit, 20% down |
For more on all loan types, see our home loans page.
FHA Loans
How Much Down Payment Does an FHA Loan Require?
An FHA loan requires 3.5% down with a credit score of 580 or higher. Borrowers with a score between 500 and 579 generally need 10% down. Your down payment can come from savings or from gift funds from an eligible family member or other approved donor, and in some cases from down payment assistance programs.
What Is the FHA Advantage Program?
The FHA Advantage Program is our program for FHA borrowers with lower credit, and it lists credit scores as low as 550. Terms, down payment and eligibility vary, so ask us what applies to your situation before you apply.
What Does FHA Mortgage Insurance Cost?
FHA loans charge two mortgage insurance premiums. The upfront premium is a percentage of the loan amount, typically financed into the loan, and the annual premium is divided into your monthly payments. The annual rate depends on your loan size, term and down payment.
How long you pay depends on your down payment. With less than 10% down, annual premiums generally last for the life of the loan, and with 10% or more down they generally last 11 years. Many borrowers later refinance into a conventional loan to remove the insurance once they have enough equity.
What Are the FHA Loan Requirements?
FHA loans have rules about the borrower, the property and the loan.
- Credit: 580 or higher for 3.5% down, with lower scores possible under our FHA Advantage Program.
- Income and debt: steady, documented income and a debt-to-income ratio commonly around 43%, with higher ratios sometimes allowed when you have strong offsetting factors.
- Occupancy: the home must be your primary residence, and you must move in within a set time after closing.
- Property: one- to four-unit homes, condos and townhomes that meet FHA standards.
- Appraisal: an FHA appraiser checks value and the home’s safety, soundness and security.
- Loan limits: FHA limits vary by county. Check your county’s limit on the HUD website or ask us.
Can I Use an FHA Loan to Buy a Two- to Four-Family Home?
Yes, if you live in one of the units. FHA allows 3.5% down on owner-occupied one- to four-unit homes for qualifying borrowers, and rent from the other units can sometimes help you qualify, depending on the program. This is a common route in cities such as Newark, Jersey City and New York City.
Can an FHA Loan Cover Repairs?
Yes. The FHA 203(k) loan finances both the purchase and the repairs in one loan. The Limited 203(k) is for smaller, non-structural repairs, and the Standard 203(k) is for larger projects that include structural work. A HUD-approved consultant is typically required for the Standard version.
What Is an FHA High-Balance Loan?
An FHA high-balance loan is an FHA loan above the standard county limit, available in higher-cost counties. Many areas of New Jersey and New York qualify for higher limits. Ask us for the limit that applies to your county.
Can You Refinance an FHA Loan?
Yes. We arrange FHA purchase and refinance loans. FHA borrowers also sometimes qualify for streamline refinances with reduced documentation, and some choose to refinance into a conventional loan to remove mortgage insurance. See our refinance page.
VA Loans
Who Qualifies for a VA Loan?
You may qualify if you are a veteran, an active-duty service member, a member of the National Guard or Reserves who meets service requirements, or in some cases a surviving spouse. Each group has minimum service requirements, and you need a Certificate of Eligibility (COE) from the VA, which we can help you request.
What Are the Benefits of a VA Loan?
The main benefits are often no down payment, no monthly mortgage insurance, and competitive terms.
- Zero down payment: eligible borrowers can often finance 100% of the purchase price.
- No monthly mortgage insurance: VA loans don’t charge it, which can lower your monthly payment.
- Flexible credit: the VA has no minimum credit score, though lenders set their own.
- Limited closing costs: the VA limits certain fees and allows sellers to pay some costs.
- Reusable benefit: you can use your VA benefit more than once.
What Is the VA Funding Fee?
The VA funding fee is a one-time charge that helps fund the VA loan program. It’s a percentage of the loan amount that depends on your service type, your down payment and whether it’s your first VA loan, and you can finance it into the loan. Some borrowers are exempt, including veterans who receive VA disability compensation and surviving spouses who receive certain VA benefits.
What Are the VA Loan Requirements?
VA loans have rules about eligibility, the borrower and the property.
- Eligibility: a valid Certificate of Eligibility.
- Credit and income: lender-set credit minimums, steady income and a debt-to-income ratio, with VA also reviewing your residual income.
- Occupancy: the home must be your primary residence.
- Property: one- to four-unit homes and VA-approved condos that meet VA minimum property requirements.
- Appraisal: a VA-assigned appraiser values the home and checks that it meets those requirements.
Can You Refinance a VA Loan?
Yes. VA borrowers have refinance options, including streamlined and cash-out refinances. Terms depend on your current loan and the lender. Ask us what’s available for your situation.
FHA vs. VA: Which Is Better for You?
If you are eligible for a VA loan, it is often the better choice because of no down payment and no monthly mortgage insurance. If you aren’t, FHA is a strong option for buyers with a small down payment or lower credit. We compare both, along with conventional loans, so you can see the real cost of each.
| If you | Consider |
|---|---|
| Are an eligible veteran or service member | VA first |
| Aren’t VA-eligible and have a small down payment | FHA |
| Have a lower credit score | FHA or the FHA Advantage Program |
| Have strong credit and 20% down | Conventional |
| Want to buy a home that needs repairs | FHA 203(k) |
What About Condos and FHA or VA Loans?
Condos must meet FHA or VA approval requirements to qualify for these loans, which means the building has to be on an approved list or approved for your specific unit. This matters in Florida, where many purchases are condos, and in New Jersey and New York. Ask us to check a building early. If it isn’t approved, conventional and non-warrantable condo loans may still be an option.
How Do You Apply for an FHA or VA Loan?
You apply by getting pre-approved, finding a home, choosing your program, and moving through appraisal, underwriting and closing. Most purchases close in roughly 30 to 60 days after the contract is signed.
- Get pre-approved: we review your documents and confirm FHA or VA eligibility. See our mortgage pre approval page.
- Find a home and sign a contract: make offers with your pre-approval in hand.
- Appraisal: an FHA or VA appraiser values the home and checks property standards.
- Underwriting: the lender verifies your file and issues approval.
- Closing: you sign and receive the keys.
What Documents Do You Need for an FHA or VA Loan?
- Government-issued photo ID and Social Security number
- Pay stubs, W-2s and two years of tax returns
- Recent bank and asset statements, and gift letters if applicable
- The signed purchase contract
- For VA loans: your Certificate of Eligibility and, for some borrowers, discharge papers such as a DD-214
- If self-employed: business returns and a profit-and-loss statement
Who Is American Capital Mortgage Inc.?
American Capital Mortgage Inc. is a mortgage broker and banker headquartered in Orange, New Jersey, licensed as a mortgage broker in Florida and several other states. Sunny Jain, our founder and CEO, has been in the mortgage business since 1996, with prior experience at Bank America Mortgage and Bank of NY. You can verify licensing for our loan officers at NMLS Consumer Access.
- Sunny Jain, CEO (NMLS ID 13710): residential and commercial originations, 30+ years of experience
- Rajiv Jain, Vice President (NMLS ID 16291): 20+ years in the mortgage business
- Joe St. Rose, Loan Officer (NMLS ID 1473569): multifamily and commercial mortgage origination
FAQs:
FHA guidelines allow 3.5% down with a 580 score, and borrowers with scores between 500 and 579 generally need 10% down. Our FHA Advantage Program lists scores as low as 550.
Yes. FHA loans are not limited to first-time buyers. You can use one if you will live in the home as your primary residence.
Yes. FHA loans charge an upfront premium and an annual premium paid monthly, and how long you pay depends on your down payment.
Often, yes. Eligible borrowers can usually finance 100% of the purchase price, subject to lender and property requirements.
The VA doesn’t set one, but each lender sets its own minimum, so your options depend on the lender and your profile.
Yes. You can use your VA loan benefit more than once, and in some cases more than one VA loan at a time, depending on your remaining entitlement.
Yes, if the condo meets FHA or VA approval requirements. We can check the building early, which saves time before you make an offer.
If you’re VA-eligible, a VA loan is often better because it usually has no down payment and no monthly mortgage insurance. If you aren’t, FHA is a strong option for smaller down payments and lower credit.
Ready to Apply for an FHA or VA Loan?
Get your free quote today Contact us or Call: 516-327-6000
Email: sunnyjain@amcaps.com
Address: 439 Main Street, Suite 102, Orange, NJ 07050