Suppose a buyer purchases a home in the city of Richmond at $375,000, a round illustrative figure in the range of city-level median estimates from Zillow and the Virginia REALTORS market reports (confirm the current median as of October 2026). At an illustrative 6.25% rate on a 30-year term, a VA loan with the funding fee financed comes to about $2,359 a month in principal and interest, with no monthly mortgage insurance. An FHA loan with the same price and rate comes to about $2,436 once principal, interest, and annual mortgage insurance are added. The buyer also brings $13,125 less to the table with VA.
Those gaps shift with credit, entitlement, property type, and how long you stay. This VA loan vs FHA loan comparison is built as seven decision strategies for veterans, service members, and military families, and for civilians weighing FHA. By Duane Buziak, NMLS #1110647.
- 1. Confirm VA Eligibility Before Comparing Anything Else
- 2. Compare Down Payment and Cash-to-Close Side by Side
- 3. Price the Mortgage Insurance Difference Over Time
- 4. Match Your Credit Profile to Each Program’s Real Flexibility
- 5. Stress-Test Debt-to-Income and Residual Income
- 6. Check Property Standards and Appraisal Rules
- 7. Plan for Loan Limits and Your Long-Term Exit
- Which Step to Run First
- VA vs FHA Loan Questions Richmond Buyers Ask
1. Confirm VA Eligibility Before Comparing Anything Else
A VA loan is available only to buyers with qualifying service, so eligibility decides whether this comparison applies to you at all. The Certificate of Eligibility (COE) is the document that proves it. It also shows your entitlement, which is the amount of the VA guaranty available to you. Full entitlement means no VA-imposed loan limit. Partial entitlement, for example when part of it is tied up in an earlier VA loan, changes how much you can borrow with no down payment.
Consider an illustration: a National Guard member with six years of service requests a COE through the lender portal before touring any homes. The COE comes back showing full entitlement, so the VA path is open and the rest of the comparison is real, not hypothetical.
- Gather your DD-214 if you are a veteran, or a statement of service if you are on active duty. Guard and Reserve members typically need their retirement points statement as well.
- Request the COE through your loan officer, who can often pull it directly, or on va.gov.
- Read the entitlement line and confirm whether it is full or partial.
- Note whether you have used the benefit before, since that changes the funding fee covered in Strategy 3.
The common mistake is deciding from memory. Some people write themselves off because they never deployed, and others believe they qualify when their service dates or discharge type say otherwise. The COE settles it in minutes, not guesses.
Measure this one simply: the COE is in hand and entitlement is confirmed before you write your first offer.
2. Compare Down Payment and Cash-to-Close Side by Side
VA allows 0% down for eligible borrowers with enough entitlement. FHA requires 3.5% down with a credit score of 580 or higher, and 10% down for scores between 500 and 579. At the illustrative $375,000 price, that is $13,125 for FHA versus $0 for VA.
Down payment is only part of cash to close. Lender fees, title charges, prepaid taxes and insurance, and escrow deposits apply to both programs. Suppose those items total $10,000 on the same house. Then FHA cash to close is $23,125 and VA is $10,000. The FHA upfront mortgage insurance premium (1.75%, or $6,332.81 here) and the VA funding fee (2.15% for first use with no down payment, or $8,062.50) are normally financed, so they raise the loan balance, not the cash you bring.
VA does not mean the absence of closing costs. It limits which fees a veteran may be charged, and negotiated seller credits or no-out-of-pocket closing options can reduce what you pay, but the costs themselves still exist. Duane Buziak asks buyers to compare in writing, which is where Dare to Compare earns its keep.
- Pick one property and one price.
- Request two Loan Estimates, one VA and one FHA. A NoTouch Credit Pull lets you start the conversation without a hard inquiry.
- Compare the cash to close line, then each section above it.
The mistake is comparing only the down payment line and ignoring everything below it. The metric is total cash to close for each program on the same property.
3. Price the Mortgage Insurance Difference Over Time
Both programs charge for the government backing, but the fees behave differently. The VA funding fee is a one-time charge, typically financed, and it is waived for veterans receiving VA disability compensation and certain others. The va.gov funding fee tables list the percentages by down payment and first or subsequent use. FHA charges an upfront premium plus an annual premium billed monthly, and HUD publishes the current schedule.
Take the illustration from the introduction. On the $361,875 base FHA loan, upfront MIP of 1.75% adds $6,332.81, for a loan of $368,207.81. At an annual MIP of 0.55%, the first-year charge is about $2,025, or roughly $169 a month. Over 60 months that is about $10,100, and over 120 months about $20,200, trimmed modestly as the balance falls. Add the upfront premium and FHA runs roughly $16,400 at five years and $26,500 at ten years. The VA funding fee on the same price is $8,062.50, and nothing recurs.
Two misconceptions do the damage here. First, FHA annual MIP does not drop off at 80% loan-to-value. With less than 10% down on a 30-year loan, it generally stays for the life of the loan, and the usual way out is a refinance. Second, VA is not free; the funding fee is real money, and a subsequent-use fee is higher than a first-use fee.
- Pull current fee schedules from va.gov and hud.gov.
- Run the monthly payment under each program with the fees included.
- Multiply the recurring cost by the number of months you expect to hold the loan, then add the upfront fee.
Measure total insurance or fee cost across your expected years in the home, not just year one.
4. Match Your Credit Profile to Each Program’s Real Flexibility
Lead with the myth: the VA does not set a minimum credit score. Individual lenders do, through overlays, which are requirements stricter than the program’s published rules. FHA publishes tiers, 580 for 3.5% down and 500 to 579 with 10% down, but lenders often layer their own floors on top. Neither program accepts every file, and neither rejects by a single number alone.
Here is a labelled illustration. A buyer has a 620 score and one recent collection account. One lender may decline under VA because of its overlay, while another lender, working with a different set of guidelines, approves the same file under either program. The same borrower looks very different depending on who reviews the file, which is why access to hundreds of wholesale lenders matters more than any single published number.
- Start with a soft-pull pre-approval so there is no impact to your score. Duane Buziak’s NoTouch Credit Pull is built for this stage.
- Read your credit report line by line, flagging collections, late payments, and utilization above 30%.
- Ask the loan officer to check overlay options across wholesale lenders for both VA and FHA.
- Compare rate quotes at your current score under each program.
The common mistakes run in opposite directions: giving up because a score “is too low for VA,” or assuming FHA takes any score. Measure pre-approval outcomes and rate quotes under each program at the score you have today. If a few points of improvement would change the outcome, set a specific target and revisit.
5. Stress-Test Debt-to-Income and Residual Income
Debt-to-income (DTI) divides your monthly debt payments, including the new mortgage, by gross monthly income. FHA guidelines start near 31% for housing and 43% for total debt, and automated approvals can go higher with compensating factors. VA treats 41% as a guideline, not a ceiling. VA adds a second test, residual income: the money left each month after debts, taxes, and a maintenance allowance, measured against tables built by region and family size.
Illustration: a family of four carries a moderate car payment and a student loan. Their DTI sits close to the FHA limit, which would make an FHA file tight. Under VA, the same family clears the residual income table with room to spare, so approval hinges on a test that reflects what a household of four really has left over.
- List every monthly debt, including minimum card payments, auto, student loans, and child support.
- Divide the total, with the projected housing payment, by gross monthly income.
- Find your region and family size in the VA residual income table on va.gov, or have your loan officer run it.
- Identify which test is the binding constraint for each program.
The common mistakes are ignoring residual income entirely and treating a high DTI as an automatic denial. Strong residual income, savings, or a steady employment history can carry a higher DTI. Measure two numbers per program: DTI percentage and residual income surplus.
6. Check Property Standards and Appraisal Rules
Both programs require the home to meet minimum property standards, and the appraiser acts as a gatekeeper. VA minimum property requirements call for a home that is safe, sanitary, and structurally sound. FHA follows HUD standards that cover similar ground. Peeling or chipping paint on an older structure can be flagged by either program, because pre-1978 homes raise lead-based paint concerns. Condos add a layer: the project itself must be approved before the loan can close.
Imagine a buyer who falls for an older Richmond home with a deteriorating exterior and another who likes a condo. The first home may need paint repaired before closing. The condo may sit on an approved list for one program and not the other, which would decide the loan choice before rates ever enter the picture. HUD maintains a searchable condo project lookup for FHA, and VA keeps its own approved list.
- Before you write an offer on a condo, ask your lender to verify project approval under VA and FHA.
- Walk the home against appraisal standards: roof, heating, water, peeling paint, and safety hazards.
- Write repair terms into the contract, including who pays and the deadline.
- If major work is needed, ask about renovation financing options such as FHA 203(k) before ruling the property out.
The classic mistake is falling in love with a condo or fixer and checking program eligibility afterward. Measure whether the appraisal passes without required repairs, or with repairs scoped and priced before closing.
7. Plan for Loan Limits and Your Long-Term Exit
FHA loans carry county-level limits set by HUD, while VA loans have no limit for borrowers with full entitlement. For 2026, the FHFA conforming baseline is $832,750, and VA county limits for partial entitlement tie to it. The one-unit FHA floor in 2026 is $541,287. Confirm the Richmond-area limit on the HUD limit lookup, since limits are revised annually.
Illustration: a buyer eyeing a $540,000 home sits right at the FHA ceiling, with a base loan that could be pushed over it by the financed upfront premium. VA with full entitlement avoids that issue. That buyer also plans an Interest Rate Reduction Refinance Loan (IRRRL) down the road if rates fall. FHA owners can streamline too, but the annual MIP usually follows them unless they refinance out of the program.
- Check the HUD limit for the Richmond area and your target price.
- Confirm your VA entitlement from the COE.
- Ask for a refinance roadmap: what rate drop would make a future refinance worthwhile.
- Request a side-by-side quote that shows both programs over your planned holding period.
The common mistake is choosing on first-year payment alone and ignoring long-term insurance cost and refinance options. Measure the break-even month on any future refinance (closing costs divided by monthly savings) and total cost over the years you plan to stay.
Program Comparison Reference
| Factor | VA Loan | FHA Loan |
|---|---|---|
| Who qualifies | Eligible veterans, service members, and certain surviving spouses with a COE | Any qualified buyer, civilian or military |
| Minimum down payment | 0% with full entitlement | 3.5% at 580+, 10% at 500 to 579 |
| Upfront fee | Funding fee, 2.15% first use with no down payment, waived for some disabled veterans (as of October 2026, confirm on va.gov) | Upfront MIP, 1.75% of the base loan |
| Ongoing insurance | None | Annual MIP, generally life of loan with under 10% down |
| Credit score | No VA minimum; lender overlays apply | Published tiers plus lender overlays |
| Debt test | 41% DTI guideline plus residual income | DTI guidelines, higher with automated approval |
| Loan limit | None with full entitlement | County limit set by HUD |
| Illustrative payment on $375,000 at 6.25% | About $2,359 (P&I) | About $2,436 (P&I plus MIP) |
Which Step to Run First
Start with eligibility. If the COE says you qualify, run the cash-to-close and insurance math next, because those two numbers move the decision most. Then check credit, DTI, residual income, and the property itself. If you are a civilian, you can skip Strategy 1 and use the rest to see how FHA holds up against your own numbers. Rates in the illustrations are placeholders, so check the current range on Freddie Mac’s weekly survey and the CFPB’s homebuying guides for borrower protections. Neither source is a quote.
Whether you’re a veteran ready to use your hard-earned benefits or a homebuyer exploring your financing options, your path to homeownership starts with expert guidance you can trust. Connect with Duane today for a personalized consultation and discover the mortgage solution tailored to your unique goals in the Stafford County and Richmond area. Ask Duane Buziak at Richmond Home Loans by Duane Buziak for a side-by-side VA and FHA quote on the property you’re considering.