November 10, 2010
Military veterans eligible to use the VA home loan program have a very important benefit they can use to get affordable housing. So why would a vet consider using an FHA home loan? After all, both VA loans and FHA mortgages offer similar things–a guaranteed loan backed by the government that makes the borrower more attractive to the right lender.
Like the VA loans program, the FHA doesn’t offer “direct financing”. The FHA acts in the same was as the Department of Veterans Affairs, offering a loan guarantee for qualified, approved borrowers. Like the VA loans program, the FHA has credit requirements, more lenient terms and conditions, and has options for financed closing costs and other expenses for approved borrowers.
While it’s true that a military veteran who is also a first time home buyer would most likely turn to the VA loans program first, but there are plenty of situations where it could be to a veteran’s advantage to explore an FHA loan option. For example, a vet who has used their entitlement before and isn’t able to get that entitlement restored may decide to examine an FHA loan option instead.
A veteran who had a VA mortgage that was assumed could find themselves in a difficult position with regard to their VA loan eligibility–VA home loan regulations state the veteran can’t get entitlement restored until they have been officially released from all liability connected with the assumed loan. In situations like these, an FHA loan could be an attractive alternative.
A veteran who wants to re-use their eligibility for a new VA home loan may discover the funding fee for that VA loan is higher than the FHA’s mortgage insurance premium–in these cases the buyer may turn to the FHA instead in order to save money on fees.
At one time the FHA offered special perks for vets, but the FHA system has since changed and those provisions have been eliminated, but the core FHA advantages to conventional loans still apply regardless of military status. The FHA reminds veterans that like the VA,
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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