Last updated: September 2025
Quick Answer
If you qualify for a VA loan in 2025, it’s almost always the smarter choice. Here’s why.
VA loans offer qualified veterans $0 down, no monthly mortgage insurance, and lower interest rates than FHA loans. While FHA loans now have reduced MIP in 2025, they still carry higher long-term costs and require a minimum 3.5% down payment.
Overview: Comparing VA and FHA loans
VA and FHA loans are both government-backed mortgage options, but they serve different borrower profiles and come with very different costs over time. In 2025, both programs will remain popular; yet, VA loans offer substantial advantages for eligible veterans and service members.
This article examines the key differences in cost, qualification, mortgage insurance, and long-term affordability between VA and FHA loans in 2025.
VA vs FHA loan comparison table
| Feature | VA Loan (2025) | FHA Loan (2025) |
|---|---|---|
| Minimum down payment | $0 | 3.5% (with 580+ credit score) |
| Mortgage insurance | None | Monthly MIP required |
| Upfront fee | Funding fee (0.5%–3.3%) | Upfront MIP (1.75%) |
| Monthly insurance | None | 0.55%–0.75% annual MIP |
| Credit score flexibility | Flexible (often 620+) | 580+ for 3.5% down; 500–579 with 10% |
| Occupancy requirement | Primary residence only | Primary residence only |
| Loan limits | No limit with full entitlement | $498,257 (standard limit) |
| Appraisal standard | VA appraisal + MPRs | FHA appraisal + MPS |
| Available to | Veterans, active-duty, surviving spouses | All borrowers |
1. Down payment requirements
VA loans allow $0 down payment, regardless of home price (with full entitlement). This gives veterans a clear affordability edge, especially in high-cost areas.
FHA loans require a minimum 3.5% down payment for borrowers with credit scores of 580 or higher. If your score is between 500 and 579, you must put down 10% of the total amount.
Example:
- $350,000 home
- VA loan down payment: $0
- FHA loan down payment: $12,250 (3.5%)
The VA program enables borrowers to retain savings or apply funds toward closing costs or repairs.
2. Mortgage insurance vs VA funding fee
FHA loans require mortgage insurance in two forms:
- Upfront MIP: 1.75% of the loan amount, typically rolled into the loan
- Annual MIP: Paid monthly, usually 0.55%–0.75%, depending on LTV and loan size
VA loans do not require mortgage insurance. Instead, they charge a VA funding fee, which is:
- 2.15% for first-time use with no down payment
- 3.3% for subsequent use
- Waived if you have a VA disability rating of 10% or more
Despite the funding fee, the lifetime cost of a VA loan is often significantly lower, especially when compared to the ongoing insurance premiums associated with other types of loans.
3. Monthly payments: VA vs FHA
VA loans typically have lower interest rates than FHA loans in 2025. Combine this with no monthly mortgage insurance, and the result is lower monthly payments for most eligible borrowers.
Monthly cost comparison (2025 example):
| Loan Amount | VA Loan (5.75% APR) | FHA Loan (6.25% APR + MIP) |
|---|---|---|
| $350,000 | ~$2,043 | ~$2,314 |
Assumes 30-year fixed rate, no down payment on VA, 3.5% down on FHA
Over the life of the loan, this difference adds up to tens of thousands of dollars in savings.
4. Loan limits and eligibility
VA loans have no loan limits in 2025 for borrowers with full entitlement. You can buy above the local conforming loan limits without a down payment, as long as your lender approves it.
FHA loans are subject to county-specific limits. In most areas, the 2025 standard limit for a single-family home is $498,257. High-cost areas have higher limits.
VA eligibility:
- Must have served in the military or be an eligible surviving spouse
- Must obtain a Certificate of Eligibility (COE)
- No income cap or first-time buyer restriction
FHA eligibility:
- Open to all borrowers, including first-time buyers
- No military service required
- Easier credit and income thresholds for some
5. Credit score and DTI requirements
VA loans are flexible with credit history. While most lenders prefer scores of 620 or higher, VA underwriting considers residual income more heavily than traditional DTI.
FHA loans allow:
- 580+ scores for 3.5% down
- 500–579 scores for 10% down
- DTI ratios up to 57% in some cases, with strong compensating factors
If you have a limited credit history or a history of past financial issues, FHA may offer more accessibility—but at a higher cost.
6. Which is cheaper long-term?
Even though FHA has reduced MIP in 2025, it still adds significant cost over time. In contrast, VA loans eliminate the need for monthly insurance and offer lower interest rates to those who qualify.
Over a 30-year term:
- A VA loan may save $20,000–$40,000 in interest and insurance
- VA loan payments remain lower month-to-month
- VA borrowers avoid lifetime MIP, which never drops off unless refinanced
If you’re eligible for a VA loan, it’s almost always more cost-effective than an FHA over the long haul.
FAQ: VA vs FHA Loans in 2025
VA loans are for eligible veterans and require no down payment or mortgage insurance. FHA loans are available to anyone, require a minimum down payment of at least 3.5%, and include monthly mortgage insurance.
VA loans usually result in lower monthly payments because they don’t include PMI and often have lower interest rates.
Yes, FHA loans have more lenient credit scores and income requirements, making them a good option for first-time or lower-credit borrowers.
Yes, if you’re eligible for VA benefits, you can refinance from an FHA loan to a VA loan and eliminate PMI using a VA cash-out refinance.
No, not for borrowers with full entitlement. You can borrow above conventional limits with no down payment as long as your lender approves.
Eligible for both? VA wins in 2025
If you’re eligible for both VA and FHA loans, the VA loan is the clear winner for long-term affordability in 2025. It offers:
- Zero down payment
- No monthly PMI
- Lower interest rates
- More purchasing power
- No loan limit with full entitlement
Even with FHA’s updated lower mortgage insurance premium this year, the VA program provides greater savings for most buyers over the life of the loan.
Eligible for both? Let’s run the numbers side by side—get a custom VA quote from a team that knows the mission.
