FHA Loan Options for Veterans

March 18, 2022

Have you already used your VA loan entitlement on another home loan but want to purchase a new primary residence? Veterans interested in buying a home have many choices when it comes to mortgages. The most important one is the VA home loan benefit but not all military members or veterans choose to use the VA mortgage to buy a home.

FHA loans don’t have a no-money-down option but the down payment is low enough that a borrower who chooses an FHA mortgage could do so without putting down 20%. 

That’s the amount typically mentioned for a down payment when you want to avoid paying for mortgage insurance. FHA mortgages do require a mortgage insurance premium. It’s payable for either 11 years or the duration of the mortgage depending on factors like the loan-to-value ratio.

FHA loans offer similar options to VA mortgages. Do you want a construction loan to build a home from the ground up? FHA mortgages include this option. You’ll need to find a participating FHA lender who offers construction mortgages, not all FHA lenders do.

Not everyone who seeks an FHA mortgage wants to purchase. Some want to refinance; they may have already purchased a home, assumed a home loan, or even inherited a house. In such cases, what are the veteran's options?

FHA Cash-Out Refinancing can be used to refinance an existing FHA or non-FHA mortgage. You can also choose a no-cash-out version. Borrowers who are already paying on an FHA mortgage can do an FHA-to-FHA refi using a Streamline Refinance loan.

These loans feature no cash back to the borrower--that’s a general rule for Streamline refinance transactions. Typically the new loan must result in some kind of benefit for the borrower. That can be in the form of a lower monthly payment or getting out of an adjustable-rate home loan into a fixed-rate mortgage.

And when thinking about buying or refinancing, don’t forget that in the FHA loan program you will find a similar Energy Efficient Mortgage option to VA mortgages. 

Both loan programs allow you to apply for extra funds that will be used specifically for approved energy-saving upgrades to the home.

VA and FHA Energy Efficient Mortgage programs both require the use of an energy consultant. You can choose from a list of approved upgrades you can install, as well as a list of things that cannot be done with this type of add-on to the mortgage.

Ask a participating loan officer about these FHA options, how similar they may be to the VA loan versions of the same loan or loan type, and what it takes to qualify for the refinance loan with that financial institution.

VA loans and FHA mortgages are not identical, but they do have many traits in common since they are both government-backed mortgages.

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