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in Ukiah, CA
Both FHA and VA loans offer government backing, but they serve different borrowers with different benefits. If you're eligible for a VA loan, it usually beats FHA on cost and terms.
The real question isn't which loan is better overall—it's whether you qualify for VA benefits. Most Ukiah buyers without military service default to FHA for its low down payment and lenient credit standards.
FHA loans let you buy with just 3.5% down if your credit score hits 580. Scores between 500-579 require 10% down, but most lenders set their own 580 minimum anyway.
You'll pay mortgage insurance for the life of the loan unless you put down 10% or more. The upfront premium is 1.75% of the loan amount, plus annual premiums between 0.45%-1.05% depending on your loan size and down payment.
VA loans require zero down payment for eligible veterans and active-duty service members. There's no mortgage insurance, which saves hundreds per month compared to FHA.
You pay a one-time funding fee ranging from 1.4% to 3.6% based on service type and whether it's your first VA loan. Disabled veterans get the fee waived completely, making this the cheapest mortgage option available.
Down payment separates these loans most clearly. FHA needs 3.5% minimum while VA needs nothing. On a $500,000 Ukiah home, that's $17,500 upfront for FHA versus $0 for VA.
Monthly costs differ even more dramatically. FHA mortgage insurance adds $250-$400 monthly on that same loan. VA has no monthly insurance, just the upfront funding fee you can roll into the loan balance.
Choose VA if you have the eligibility certificate. The combination of zero down and no mortgage insurance makes it unbeatable for qualified borrowers. Even the funding fee costs less over time than FHA insurance.
Pick FHA if you're not military-connected but need a low down payment. It works well for first-time buyers in Ukiah who can't save 20% but have stable income. Just understand you're trading accessibility for higher long-term costs.
VA loans require homes to meet minimum property standards, which rules out major rehabs. FHA 203(k) loans handle repairs better if the property needs work.
Neither is particularly strict—both accept debt-to-income ratios up to 50% with compensating factors. VA is slightly more flexible with credit overlays than FHA.
Some sellers hesitate on VA loans due to property condition requirements and appraisal issues. FHA has similar but slightly less restrictive property standards.
Yes, you can refinance an FHA loan into a VA loan once you've built some equity. This drops your mortgage insurance and often lowers your rate.
You can restore VA eligibility by selling that property or using a one-time restoration. You can also use remaining entitlement for a second home if enough remains.