For most veterans with full entitlement, a VA loan costs less than an FHA loan. It needs no down payment and no monthly mortgage insurance. FHA needs as little as 3.5 percent down and charges mortgage insurance on top.
But "most" is not "all." There are a few situations where FHA can come out ahead. In one of them, our example below has FHA needing about $20,800 less cash at closing, though it adds a monthly premium a VA loan does not have. This guide shows the side-by-side first, then the cases where FHA wins, then the cases where it does not.
How do VA and FHA loans compare side by side?
For a veteran with full entitlement, a VA loan usually costs less: no down payment and no monthly mortgage insurance, against FHA's 3.5 percent down and monthly premium. The two programs differ on down payment, upfront cost, monthly mortgage insurance and who can borrow. Here are the main points, using the VA's and HUD's published rules.
| VA loan | FHA loan | |
|---|---|---|
| Down payment | None required, if the home appraises for at least the price | As low as 3.5% |
| Credit score | The VA sets no minimum; lenders set their own | 580 or higher is eligible for maximum financing; 500 to 579 is limited to 90% loan-to-value; below 500 is not eligible |
| Upfront charge | Funding fee: 2.15% first use, 3.3% subsequent use, with less than 5% down | Upfront mortgage insurance premium: 1.75% of the base loan |
| Monthly mortgage insurance | None | Annual premium, 0.50% to 0.55% for a 30-year loan at or under the national conforming limit ($832,750 in 2026) |
| Loan limit | None with full entitlement; the county limit applies only with reduced entitlement | FHA county limit: $541,287 to $1,249,125 for a one-unit home in 2026 |
| Who can borrow | Eligible veterans, service members and certain spouses | No military-service requirement |
| Uses VA entitlement | Yes | No |
The funding fee drops to 1.5 percent with 5 percent down and 1.25 percent with 10 percent down. You do not pay it at all if you receive VA compensation for a service-connected disability, among other exemptions on the VA's list. The VA also lets you finance the fee into the loan.
FHA's annual premium follows a schedule that HUD set in Mortgagee Letter 2023-05, effective March 20, 2023. For a 30-year loan at or under the base-loan threshold, it is 0.50 percent if the loan-to-value is 95 percent or less and 0.55 percent above 95 percent. It lasts 11 years at 90 percent or less, and for the life of the loan above that. Premiums can change, so confirm the current schedule with your lender.
What does each loan cost on the same home?
On the same home, an FHA loan asks for more cash at closing and adds a monthly premium that a VA loan does not have. The VA loan has a larger upfront fee, unless you are exempt.
Here is a hypothetical $520,000 home. It assumes full entitlement, first use of the VA benefit, and a credit score of 580 or higher. It is an illustration, not a quote.
| VA (full entitlement) | FHA (3.5% down) | |
|---|---|---|
| Down payment | $0 | $18,200 |
| Base loan amount | $520,000 | $501,800 |
| Upfront charge | $11,180 (2.15% funding fee; $0 if exempt) | $8,781.50 (1.75% upfront premium) |
| Monthly mortgage insurance | None | About $230 (0.55% a year, divided by 12) |
That FHA premium runs for the full loan term here, because the loan-to-value is above 90 percent. It is a monthly cost a VA loan does not carry.
This is why VA is the default for a veteran with full entitlement. The comparison changes when your entitlement is reduced.
When can FHA cost less than a VA loan?
FHA can cost less in four situations: you have reduced VA entitlement on a higher-priced home, you are buying with a co-borrower who is not your spouse or a veteran, you want to leave your VA entitlement untouched, or a lender will offer FHA at your score but not VA. In each, run both loans on your actual home before you decide.
You have reduced VA entitlement and the price is above what it covers
This is the case most likely to favor FHA. If you still have a VA loan on another home, or you used entitlement that was not restored, the VA works out what you have left from the county loan limit. A lender may ask for cash on any part of the price above what that entitlement supports.
The VA's method is to multiply the county limit by 25 percent, subtract the entitlement you used, and multiply the result by 4. The VA describes that as the most a lender would typically make without a down payment.
Take a hypothetical. The county limit is $832,750, the 2026 baseline in most counties. You used $100,000 of entitlement on a prior $400,000 VA loan. Remaining entitlement is $108,187.50, and the rough no-down-payment ceiling is $432,750.
For prices above $432,750, a lender may ask for a down payment on the amount over the ceiling. The table uses 25 percent of that amount, a common yardstick based on the VA's note that most lenders want entitlement plus down payment to cover at least 25 percent. Some lenders count it differently and some ask for more.
| Home price | Estimated cash on a VA loan | Cash on an FHA loan (3.5%) |
|---|---|---|
| $450,000 | $4,313 | $15,750 |
| $520,000 | $21,813 | $18,200 |
| $600,000 | $41,813 | $21,000 |
At $450,000, VA needs far less cash. In this example the two cross at roughly $503,000, and above that FHA asks for less up front, up to the FHA loan limit for your county. FHA sets its own county limits, which for 2026 run from $541,287 in lower-cost areas to $1,249,125 in the highest-cost areas. The $600,000 row assumes your county's FHA limit is at least $579,000. In a county at the low end, that home is above what FHA will insure at 3.5 percent down, so check your county's limit before you compare.
Two cautions. Cash at closing is not the whole cost, since a VA loan still has no monthly mortgage insurance. And a veteran using the benefit again pays the subsequent-use funding fee of 3.3 percent with less than 5 percent down, unless exempt. Price both loans in writing, then compare cash to close, monthly payment and the cost over the years you expect to keep the loan.
You are buying with someone who is not your spouse and not a veteran
The VA's Buyer's Guide says someone else can join you on a VA loan, but the guaranty is based only on your portion. It cannot cover a non-veteran's part of the loan unless that person is your spouse. The guide also warns that joint loans are generally more complicated and that lenders may not accept them.
FHA has no service requirement, so a family member such as a sibling or parent can apply with you, and FHA insures the whole loan rather than splitting it into guaranteed and unguaranteed parts. FHA has extra rules for co-borrowers who are not family and will not live in the home, so a friend may not work unless the friend lives there too. Ask a lender how your specific mix of borrowers would be treated.
You want to leave your VA entitlement untouched
An FHA loan does not use VA entitlement. If you expect to buy again with the VA benefit while still owning this home, that can matter. The VA's Buyer's Guide says a veteran who buys a subsequent home without selling the previous VA-financed home follows the county loan limit for the guaranty, which may mean a down payment above the limit.
Weigh that against the FHA premiums above. Also keep in mind that entitlement can come back. The VA's guaranty guide describes a one-time restoration when a prior VA loan has been paid in full but you keep the home. And the Buyer's Guide says you can apply to have entitlement restored once you sell the home and pay off the loan.
One lender will offer FHA at your score but not VA
The VA sets no minimum credit score, but lenders can add their own, often called overlays. Some lenders set a higher minimum score for VA than for FHA. That is a policy of that lender, not a VA rule.
Before you switch programs, ask other lenders about the VA loan. Our guide to a VA loan with a 580 credit score explains overlays and what underwriters look at.
When does a VA loan beat FHA?
A VA loan usually wins when you have full entitlement. You put nothing down and you carry no monthly mortgage insurance. If you receive VA disability compensation, you are generally exempt from the funding fee, which removes the largest upfront cost.
Both programs let the seller help, under different rules. On a VA loan, the seller paying normal closing costs does not count toward the VA's 4 percent concession cap. Our guide to VA seller concessions vs closing costs covers the 4 percent rule.
If you are buying in a high-cost area with full entitlement, there is also no VA loan limit to worry about. Our San Diego VA loan guide shows how the county limit works and when it applies.
How should I decide between VA and FHA?
Decide with numbers on your own home, not rules of thumb. Start with the question of whether your entitlement is full or reduced, because it decides whether the comparison is even close.
- Check your entitlement. Ask a lender to confirm whether yours is full or reduced, and what is left.
- Get both loans priced on the same home. Ask for the same purchase price, and compare cash to close, monthly payment and the upfront charge.
- Look at the years, not the day-one cash. Include the FHA annual premium and how long you plan to keep the loan.
- Check who is on the loan. A co-borrower who is not a spouse or a veteran changes the VA math.
- Shop lenders for the VA loan first. A no on VA from one lender is not a no from all of them.
You can run the VA side yourself in the VA loan payment calculator. To see how our FHA options work, read about FHA loans, and for state-specific VA numbers find your state on our VA loans page.
Who can price VA and FHA on my home?
We will price the VA and FHA options side by side on your actual home and show you what each costs at closing, each month and over the years you expect to keep it. Start your pre-approval or call us at (888) 957-8387. If you want to know who you would be working with, read about Renaldo Wilson.
