FHA or VA: how the two government-backed loans differ
An FHA loan is insured by the Federal Housing Administration, part of HUD, and is open to any borrower who meets HUD's rules. A VA loan is for borrowers who qualify for VA's Certificate of Eligibility, among them veterans, service members and some surviving spouses, and the U.S. Department of Veterans Affairs guaranty stands behind part of it. An FHA loan carries mortgage insurance, and FHA publishes credit score tiers. A VA loan has no monthly mortgage insurance but has a one-time funding fee unless you are exempt, and VA sets no minimum credit score of its own. Both are loans California Mortgage Solutions places for buyers in San Luis Obispo County.
Side by side
| The rule | FHA | VA |
|---|---|---|
| Who is eligible | Any borrower who meets HUD's borrower eligibility rules, none of which requires military service. | Veterans, service members and National Guard and Reserve members who meet VA's service rules, some surviving spouses, and others VA lists. A Certificate of Eligibility shows the lender you qualify on service. |
| What backs the loan | FHA insures the lender against loss, and the loan carries premiums for that insurance: an up-front premium and an annual premium. How long the annual premium lasts depends on how much equity the loan starts with, and on some loans it lasts for the life of the loan. | VA's guaranty protects the lender on part of the loan if you default, and there is no monthly mortgage insurance. A one-time VA funding fee applies instead, waived for a veteran receiving VA compensation for a service-connected disability and in the other cases VA lists. |
| Credit score | A decision score of 580 or above for FHA's standard terms. From 500 to 579 the loan can still be insured, on more limited terms. Below 500, FHA does not insure it. A borrower with no credit score can still be eligible, underwritten by hand from other credit records. | VA sets no minimum score of its own, but it requires that you be a satisfactory credit risk, which the lender judges from a careful analysis of your credit. VA says some lenders set a minimum of their own. |
| Income and debts | Ratios of your payments to your income. FHA's TOTAL Mortgage Scorecard evaluates the file's overall credit risk. When the file is underwritten by hand, the ratio caps depend on your credit score, and from 580 up they can rise with compensating factors, residual income among them. | For a purchase, two tests: residual income, the net income left each month for family living expenses after your debts and monthly housing costs, measured against VA's guide for your loan size, family size and region; and a debt-to-income ratio, which VA's handbook treats as secondary to residual income. VA's rule asks you to meet both, and falling short on one does not by itself disqualify you. |
| Occupancy | The home you live in as your principal residence. HUD approves a second home only in narrow hardship cases, never a vacation home. An investment property is not eligible, except in cases HUD lists, such as buying a home HUD itself owns and is selling, outside the 203(k) program. If active duty keeps you from living there and your orders station you more than 100 miles away, a family member living in the home, or your intent to move in after discharge, keeps you an owner occupant. | A home you will live in. When you buy, you certify that you intend to move in within a reasonable time and make it your home. If active duty keeps you away, your spouse or a dependent child living there can meet the rule, on conditions, and a service member deployed from a permanent duty station can still meet it. |
| Loan size | Up to the county's FHA limit, the largest base loan FHA will insure: $1,000,500 for one unit in 2026, and higher for two to four units. A financed up-front premium sits on top of the limit, and the base loan can go above it in cases HUD lists, such as an energy efficient mortgage or a solar or wind energy system. | VA sets no loan limit for a veteran with full entitlement. Your lender still has to approve the amount you borrow. Without full entitlement, as when part of it is still in use on another VA loan, the entitlement you have left is based on the county's one-unit conforming limit, $1,000,500 in 2026, less what you have already used. |
| The property | It has to meet HUD's minimum property requirements, that every home FHA insures be safe, sound and secure. The lender orders the appraisal from an appraiser on FHA's roster. | It has to meet VA's minimum property requirements, which help ensure that the home is safe, structurally sound and sanitary. VA assigns the appraiser. |
| After a Chapter 7 bankruptcy or a foreclosure | Two years from a Chapter 7 discharge. A lender can accept twelve months or more when the bankruptcy came from circumstances beyond your control and you have managed your finances responsibly since. After a foreclosure, three years from the date the property left your name, with exceptions HUD lists, among them documented circumstances beyond your control once you have reestablished good credit. | A Chapter 7 discharge or a foreclosure does not by itself rule out a VA loan; the lender looks into what happened, and VA's handbook lets it disregard a discharge or a foreclosure more than two years before closing. VA's guidelines do not expect a lender to find you a satisfactory credit risk within twelve months of a discharge, and within one to two years they look for new credit since then paid satisfactorily and a verified cause beyond your control. Exceptions apply, and a self-employed borrower whose business failed has a separate test. A foreclosure is weighed under the same guidelines, and if VA paid a claim on a foreclosed VA loan, the entitlement it used is not restored until VA's loss is repaid in full. |
| If you sell | Every FHA-insured mortgage is assumable. A buyer who will live in the home and is approved in the lender's underwriting can take it over. | A buyer can take over the loan with approval from VA or its authorized agent. Among the conditions, the loan has to be current, and the buyer has to qualify on credit as a veteran would and take on full liability for it. If the buyer is a qualified veteran who substitutes the same amount of their own entitlement, yours can be restored. |
Where each one fits
FHA can fit when
- You are not eligible for a VA Certificate of Eligibility. None of HUD's borrower eligibility rules for FHA requires military service.
- You are on active duty, stationed more than 100 miles from the home, and a parent, a sibling or another family member HUD lists will live in it. HUD still counts you as an owner occupant.
VA can fit when
- You have a VA Certificate of Eligibility, or qualify for one.
- You want a loan with no monthly mortgage insurance.
- You receive VA compensation for a service-connected disability, which waives the VA funding fee.
What the two have in common
- Both are made by lenders, with a federal agency behind the loan: FHA's insurance on one, VA's guaranty on the other.
- Both can finance a home of one to four units that you live in.
- Both look at your credit, your income and the debts you already carry.
- Both can be taken over by a buyer who qualifies.
Questions
What credit score do FHA and VA loans require?
FHA publishes decision credit score tiers: a score of 580 or above is eligible for FHA's standard terms, a score from 500 to 579 is still eligible, on more limited terms, and below 500 FHA does not insure the loan. A borrower with no credit score can still be eligible for FHA, underwritten by hand from other credit records. VA sets no minimum credit score of its own, but it requires that you be a satisfactory credit risk, which the lender judges from a careful analysis of your credit, and VA says some lenders set a minimum of their own.
Does a VA loan have mortgage insurance like an FHA loan?
No. A VA loan has no monthly mortgage insurance. It has a one-time VA funding fee instead, waived for a veteran receiving VA compensation for a service-connected disability and in the other cases VA lists. An FHA loan carries an up-front mortgage insurance premium and an annual premium, which lasts for a period set by how much equity the loan starts with, and on some FHA loans for the life of the loan.
Can a veteran use an FHA loan instead of a VA loan?
Yes. HUD's borrower rules for an FHA loan do not turn on military service, so a veteran who meets them can be eligible for an FHA loan. The published rules differ: VA sets no minimum credit score of its own and has no monthly mortgage insurance but has a funding fee unless you are exempt, while FHA publishes credit score tiers and charges an up-front and an annual mortgage insurance premium.
How long after a bankruptcy or foreclosure can I get an FHA or VA loan?
For FHA, two years from a Chapter 7 discharge, though a lender can accept twelve months or more when the bankruptcy came from circumstances beyond your control and you have managed your finances responsibly since; after a foreclosure, three years from the date the property left your name, with exceptions HUD lists, among them documented circumstances beyond your control once you have reestablished good credit. For a VA loan, a Chapter 7 discharge or a foreclosure does not by itself rule you out; the lender looks into what happened, and VA's handbook lets it disregard a discharge or a foreclosure more than two years before closing. VA's guidelines do not expect a lender to find you a satisfactory credit risk within twelve months of a discharge, and within one to two years they look for new credit since then paid satisfactorily and a verified cause beyond your control. Exceptions apply, a self-employed borrower whose business failed has a separate test, and a foreclosure is weighed under the same guidelines. A Chapter 13 bankruptcy has separate rules under both.
Can a buyer take over my FHA or VA loan when I sell?
Yes, if the buyer qualifies. Every FHA-insured mortgage is assumable: the buyer has to live in the home and is underwritten by the lender before taking it over. A VA loan can be taken over with approval from VA or its authorized agent; among the conditions, the loan has to be current, and the buyer has to qualify on credit as a veteran would and take on full liability for it. The buyer does not have to be a veteran. If the buyer is a qualified veteran who substitutes the same amount of their own entitlement, yours can be restored.
Sources
The publications behind the rules above. Where a row says each lender decides for itself, no publication sets that rule. The figures for the county come from the county's loan limit page, with their own sources.
- HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook, last revised August 12, 2026, read October 14, 2026.
- VA Pamphlet 26-7, Lender's Handbook, Chapter 3: The VA Loan and Guaranty, read October 14, 2026.
- VA Pamphlet 26-7, Lender's Handbook, Chapter 4: Credit Underwriting, read October 14, 2026.
- VA Pamphlet 26-7, Lender's Handbook, Chapter 10: Appraisal Process, read October 14, 2026.
- VA Pamphlet 26-7, Lender's Handbook, Chapter 12: Minimum Property Requirement Overview, effective after May 1, 2026, read October 14, 2026.
- U.S. Department of Veterans Affairs, eligibility for VA home loan programs, read October 14, 2026.
- U.S. Department of Veterans Affairs, VA home loans: purchase loan, read October 14, 2026.
- U.S. Department of Veterans Affairs, VA funding fee and closing costs, read October 14, 2026.
- U.S. Department of Veterans Affairs, VA home loan entitlement and limits, read October 14, 2026.
- 38 U.S.C. 3704, Restrictions on loans, read October 14, 2026.
- 38 U.S.C. 3714, Assumptions; release from liability, read October 14, 2026.
- 38 U.S.C. 3729, Loan fee, read October 14, 2026.
- 38 CFR 36.4340, VA underwriting standards, read October 14, 2026.
- HUD FHA mortgage limits, San Luis Obispo County, read October 14, 2026.
- FHFA conforming loan limits, San Luis Obispo County, read October 14, 2026.
Keep reading:Every loan, comparedThe county's loan limits
Other comparisons:FHA vs conventionalFHA vs USDAVA vs conventionalVA vs CalVetConventional vs jumboBank statement vs conventionalDSCR vs conventionalHELOC vs cash-out refinanceReverse mortgage vs HELOCDSCR vs bank statementBridge loan vs HELOC
Tell us which of the two fits your file
Tell us about the property and your plans, or call.
No credit pull to get started. This is not a commitment to lend. Equal Housing Opportunity.