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General BuyerFor eligible veterans and service members, a VA loan is almost always the better deal over the life of the loan, mainly because it drops monthly mortgage insurance entirely. FHA charges an upfront premium plus a monthly premium that often runs for the life of the loan. VA charges a one-time funding fee instead, and about a third of veterans are exempt from that fee altogether. FHA still makes sense if you are not VA-eligible or need a non-spouse co-borrower.
I get this question from first-time buyers constantly, usually from someone who is VA-eligible but got quoted both loans by a lender and doesn't know why the monthly numbers look different. Here is the part most buyers miss: the interest rate isn't what separates these two loans. The mortgage insurance structure is.
Side by side on a $600,000 home
| VA Loan | FHA Loan | |
|---|---|---|
| Down payment | $0 | $21,000 (3.5%) |
| Loan amount | $600,000 | $579,000 |
| Upfront insurance/fee | $12,900 funding fee (2.15%, first use), can be financed | $10,132 upfront MIP (1.75%), added to loan balance |
| Monthly mortgage insurance | $0 | Roughly $250 to $265/month, typically for the life of the loan |
| Minimum credit score | No VA-set minimum; most lenders want 620+ | 580 for 3.5% down |
| Who qualifies | Veterans, active duty, eligible surviving spouses | Any qualifying borrower |
The upfront numbers look close. The monthly gap is where it separates. That $250 to $265 a month in FHA mortgage insurance doesn't go toward your loan balance. It's gone, every month, for as long as you carry the insurance, which on most FHA loans is the life of the loan unless you refinance.
What that monthly mortgage insurance actually costs over time
Run it out five years and the FHA borrower has paid somewhere around $15,000 in mortgage insurance alone, on top of the $10,132 upfront premium. That's money that built zero equity and covered zero principal. The VA borrower paid the one-time funding fee and nothing else, ever, related to mortgage insurance.
Pro Tip: If you're a veteran with any service-connected disability rating, even 0%, ask your lender to verify your funding fee exemption before you run any comparison. A confirmed exemption means the VA loan has zero upfront insurance cost and zero monthly cost, and the comparison isn't close at that point.
Where FHA actually wins
- You're not VA-eligible. This is the obvious one. FHA is open to any qualifying borrower.
- You need a non-spouse co-borrower. FHA allows non-occupant co-borrowers like a parent. VA generally expects the borrower to occupy the home.
- You're planning a major structural rehab. FHA's 203(k) program handles larger renovation projects more smoothly than VA renovation options in most cases.
Outside of those three situations, if you're VA-eligible, it's worth running the actual numbers before defaulting to FHA because a lender mentioned it first.
Why do sellers prefer conventional over VA?
This comes up constantly for first-time buyers using a VA loan, so it's worth addressing directly. Some sellers still carry an outdated assumption that VA loans close slower or require more repairs than other loan types. In practice, VA loans typically close in the same 30 to 45 day window as FHA and conventional loans, and an experienced agent who understands VA appraisals can usually walk a seller through that misconception without it becoming a sticking point in the offer.
FAQ
Can I use a VA loan and an FHA loan on the same purchase?
No. You choose one loan type per transaction. Some buyers do use FHA first and later refinance into a VA loan once they establish eligibility, which also eliminates the ongoing FHA mortgage insurance.
Does a VA loan have a maximum loan amount?
Not for borrowers with full entitlement. FHA does have county-specific loan limits, which for 2026 range from roughly $541,287 in lower-cost areas up to $1,249,125 in higher-cost markets.
Is the VA funding fee the same thing as mortgage insurance?
No. The funding fee is a one-time program fee that can be financed into the loan. FHA mortgage insurance is a separate ongoing monthly charge in addition to any upfront premium.
If you're weighing this decision for a purchase in San Diego North County, run your own numbers against your actual credit profile and down payment plan before assuming one loan is automatically better. Reach out here and we can walk through both side by side. More comparisons like this live on the blog.
This content is for informational purposes only and is not legal or financial advice. All real estate services comply with NAR, HUD, and California DRE regulations.
