Loans FHA Vs. Conventional Vs. VA

By Mark Kennan

Conventional, Federal Housing Administration and Veterans' Affairs loans are three types of mortgage loans used to purchase homes.

Only veterans who meet specific service requirements are eligible for a VA loan. Anyone is eligible to apply for an FHA or conventional loan.

FHA loans and VA loans are backed to a certain amount by the Federal Housing Administration and the Department of Veterans Affairs. This helps banks lend with more confidence because the loans are guaranteed by a third party, unlike conventional mortgages.

VA loans do not require any down payment. FHA loans can have a down payment as low as 3.5 percent. Conventional loans prefer a down payment of 20 percent or more but can go as low as 5 percent.

To get a conventional mortgage, you must have a good credit score. For VA and FHA loans, the requirements are lower because of the federal government guarantee on the loans.

VA loans carry a fee to fund the VA loan program that range from 0.5 to 3.3 percent of the loan. FHA loans are charged an up-front mortgage insurance premium of up to 3 percent (2.75 percent for first-time home buyers). Conventional mortgages may charge for private mortgage insurance if you do not pay at least 20 percent as a down payment.

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