Realtors often confuse VA and FHA guidelines b/c the loans are somewhat similar in that they are both backed or insured by the Federal Gov”t. There are, however, many differences as well. This blog will set them all out.
Appraisals – Similar
The appraisal requirement for FHA and VA are largely the same. Our Appraisal Manager recently wrote an excellent blog about appraisal differences, and it can be found here.
Appraisers – Different
FHA allows us to pick appraisers from our own hand-picked pool.
VA forces us to use “VA approved appraisers” assigned by the VA.
B/c we don’t have the ability to choose VA appraisers or hold them accountable, the quality of VA appraisals is often inferior.
Property Condition – Different
FHA allows for “As Is” transactions. FHA does NOT require a clear Section I.
VA requires clear Section I termite reports, and clear section II if the items are health and safety risks.
Closing Periods – Different
FHA – we can close FHA loans in 14 days.
VA – we need 21 days to close VA loans b/c appraisal turn times are slower, and b/c dealing with the VA is cumbersome in general.
Rates – Similar
Both VA and FHA have lower rates than typical conventional loans. Lower rates are in fact a major advantage of both loan types.
Mortgage Insurance – Different
FHA has mortgage insurance of 0.85% for most loans (with less than 5% down).
VA has no mortgage insurance – one of the reasons VA financing is a fantastic opportunity for veterans.
Up Front Fees – Similar
FHA has an “Up Front Mortgage Insurance Premium” of 1.75%.
VA has a “Funding Fee” of 2.15% with zero percent down. This fee decreases with larger down payments.
Down Payment – Different
FHA requires a minimum of 3.5% down.
VA allows for 100% financing (0% down).
Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646