VA or FHA Loan: What’s Best for Washington Military Members?

Washington State military members and veterans often use the VA loan program to buy a house. But FHA loans are also popular among buyers, especially those who don’t have a lot of money saved up for a down payment.

So which is a better financing option for military folks — FHA or VA mortgage loans? Let’s take a look at the key features of each program.

FHA and VA: Government-Backed Home Loans in Washington

FHA and VA loans are two examples of government-backed mortgage programs:

  • In Washington State, FHA loans are insured by the Federal Housing Administration, a government agency that falls under HUD.
  • Similarly, VA loans are partially guaranteed by the Department of Veterans Affairs.

Both of these mortgage programs receive some kind of government guarantee or insurance, which makes them different from conventional home loans that don’t receive government backing.

So that’s what these two programs have in common. There are also some key distinctions between FHA and VA loans that all Washington home buyers should know about. The down payment is one of the main differences. So let’s talk about that next.

Down Payment Differences

Washington home buyers who use an FHA loan to buy a house must make a down payment of at least 3.5% of the purchase price or appraised value. That’s the minimum required down payment for this program.

FHA borrowers in Washington can finance up to 96.5% of their home purchase. This makes the program popular with home buyers who don’t have a lot of money saved up for a down payment.

To qualify for maximum financing under this program, borrowers must have a credit score of 580 or higher. It’s possible to qualify for an FHA loan in Washington with a score below 580, but the down-payment requirement increases to 10% for those borrowers.

The VA program offers an even better deal to military home buyers in Washington, especially where the down payment is concerned. Eligible borrowers who use a VA loan can finance 100% of the purchase, which eliminates the need for a down payment altogether.

This is the primary advantage of using a VA loan to buy a house in Washington. You could purchase a home with no money down whatsoever.

Mortgage Insurance and Other Borrowing Costs

There are other costs associated with FHA and VA home loans in Washington State. As a borrower, it’s important to consider these additional costs when comparing the two options.

Military members and veterans who use the FHA program to buy a house usually have to pay for mortgage insurance. In fact, there are two different types of insurance associated with FHA loans:

  • There is an upfront premium that usually comes to 1.75% of the loan amount.
  • There is also an annual mortgage insurance premium, which for most borrowers will equal 0.85% of the amount borrowed.

In contrast, Washington State military borrowers who use a VA loan to purchase a house could avoid paying mortgage insurance. But you might encounter a funding fee. This fee typically ranges between 2.4% and 3.3%, depending on whether or not you’ve used a VA loan in the past. But even with the funding fee, this program is typically a better deal than FHA.

Let’s explore your options. Sammamish Mortgage has in-house experts who are extremely knowledgeable about FHA and VA mortgage loans in Washington. If you’re a current military member or veteran, and you want to explore your financing options, please contact our staff for help.