Anonymous asked in Business & FinanceInsurance · 9 years ago

What's the difference between an FHA insured mortgage and a VA guaranteed mortgage?

And what roles does PMI (private mortgage insurance) play in a market where FHA insurance and VA guarantees exist?

5 Answers

  • Anonymous
    9 years ago
    Favorite Answer

    An FHA insured loan is a Federal Housing Administration mortgage insurance backed mortgage loan which is provided by a FHA-approved lender. FHA insured loans are a type of federal assistance and have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford. To obtain mortgage insurance from the Federal Housing Administration, a mortgage insurance premium (MIP) equal to a percentage of the loan amount at closing is required, and is normally financed by the lender and paid to FHA on the borrower's behalf. Depending on the loan-to-value ratio, there may be a monthly premium as well

    A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA). The loan may be issued by qualified lenders.

    The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment. Eligible areas are designated by the VA as housing credit shortage areas and are generally rural areas and small cities and towns not near metropolitan or commuting areas of large cities

  • 6 years ago

    The difference between a VA backed mortgage and a FHA mortgage are about the same.

    #1.VA backed mortgage loan

    The main feature in this mortgage loan is that you are only able to qualify for this mortgage loan if you are currently on active duty, retired from the military or has once been in the military, and has a discharge under honorable conditions. This has to be the United States military. There are some features that would allow surviving spouses of certain military members, to be eligible to be approved for a VA backed mortgage.

    In being approved for a military backed mortgage, the military member is not required to have a down payment.The cost of the mortgage loan such as points and fees charged by the mortgage lender, may be rolled into the mortgage loan.

    There is a ceiling of how much you may borrower based on the area where you live. Their is a higher ceiling in California than there would be in the south and mid west as houses cost more in California.

    There is no Private Mortgage Insurance (PMI) in being approved for a VA backed mortgage loan.

    You are required to pay a monthly fee called Mortgage Insurance Premium (MIP) for the life of the mortgage loan or until you refinance the VA backed mortgage loan.

    #2.FHA mortgage loan

    This is not a loan geared toward low income people. This mortgage loan allows a potential home buyer to pay a low down payment, normally around 3.5%. A smart person that is financially aware might not want to invest 5% or 10% to purchase a property. If this person want to avoid Private Mortgage Insurance (PMI) the down payment would be 20%.

    There is a ceiling of how much you may borrower based on the area where you live. Their is a higher ceiling in California than there would be in the south and mid west as houses cost more in California.

    As in a VA backed mortgage, there is no PMI with a FHA mortgage loan.

    You are required to pay MIP each month on the mortgage loan. There are procedures where you might eliminate MIP after awhile and under certain conditions.

    You would have to consult your mortgage lender to find out the procedure and conditions in which you would be able to eliminate the MIP.

    PMI is used in conventional mortgage loans. Normally PMI is required when the borrower fail to place 20% down on the property they which to buy.

    I hope this has been of some benefit to you, good luck.

    "FIGHT ON"

  • Anonymous
    9 years ago

    Different agencies guaranteeing the loan. Different qualifications for getting a loan. All in contrast to a conventional loan or a jumbo or private loan without PMI.

    VA is for military veterans only. Very generous terms, generally higher fees over the life of the loan.

    FHA is a federal guarantee for qualified applicants by income, house, housing area, and loan amount. As with VA the approval terms are more generous, but the fees are higher.

    PMI is required for conventional loans when the buyer (you) has less than 20% of his money in the deal as measured by current market value.

  • 9 years ago

    Among other things, who they target (low income vs. vets) and whether or not the down payment can be funded (yes, for a VA loan).

    PMI is only for conventional loans. You still have to buy mortgage insurance, on FHA loans, but not VA loans. VA loans tend to have higher rates, and conventional loans, the lowest rates.

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  • 4 years ago

    I want to ask the same question as the previous person.

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