As a first-time home buyer, deciding on the best loan option is just as important as choosing the type of house or interior designs to decorate with. More often than not, most people get stuck choosing between a loan plan, and sometimes, if they do, there's always a preconceived notion that a VA loan is preferred over an FHA loan. Here’s an easy-to-understand explanation of why a VA loan is preferred over an FHA loan, and which option would best suit your needs.

What is a VA loan?

A VA loan is a home loan fully supported by the United States Department of Veterans Affairs. This type of loan is specifically made for veterans, active service members and individuals in the National Guard. Another perk of a VA loan is that they get access to awesome benefits when they use it. In addition, the government can help pay back part of the loan if the person can’t, which has made banks more comfortable lending money to veterans.

Who Can Have Access to an FHA Loan?

FHA loans are designed for first-time buyers and civilians, backed by the Federal Housing Administration and are meant for people who might not have a perfect credit score or a lot of money saved up. You don’t have to be a first-time buyer to apply for this loan. Likewise, active service members can also opt for this option depending on the long-term benefits and payment plans, as it is primarily a great choice and has lower credit score requirements than conventional loans.

Factors That Make a VA Loan Preferable Over an FHA Loan

It is always best to consult with trusted mortgage experts who can help you scale through acquiring a property easily. However, if you plan on kick-starting this process at the initial stages, you should consider a VA loan over an FHA, and why is a VA loan preferred over an FHA loan? Here are some of the advantages of a VA loan over an FHA loan:

• No down payment: Active service members and veterans have the luxury of depositing little to no amount in most cases, unlike FHA loans, where you have to deposit at least 3.5% upfront.

• Low credit and insurance mortgage: If you opt for a VA loan, your credit score can be as low as 550 with no monthly insurance mortgage requirement. However, as for an FHA loan, there must be a 10% down payment for credit scores between 500 to 579, with mandatory mortgage insurance annually.

• Low interest rates: VA loans offer lower interest rates, including other bonus packages for the selected few who are eligible. While interest rates of FHA loans might not be high, they still cannot be matched to those of a VA loan and the preferences given to active service men and veterans.

Endnote

A VA loan is always the best choice if you are still active in service or after retirement, as it costs you less money upfront, low credit score and offers insurance mortgage. On the other hand, an FHA loan is specifically for first-time buyers, depending on your financial capability and long-term goals. When in search of the perfect home loan, try to evaluate which part you fall into and opt for a plan that suits you.