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in Millbrae, CA
Millbrae homebuyers often choose between FHA and VA loans when seeking government-backed financing. Both programs offer valuable benefits, but they serve different borrower groups with distinct advantages.
FHA loans help buyers with limited savings enter the market through low down payments. VA loans exclusively serve military families and offer unmatched benefits including zero down payment options.
Understanding which program aligns with your situation can save thousands of dollars and simplify your path to homeownership in San Mateo County.
FHA loans require just 3.5% down for buyers with credit scores of 580 or higher. The Federal Housing Administration insures these mortgages, making lenders more willing to work with first-time buyers or those with past credit challenges.
Mortgage insurance is mandatory with FHA financing. Borrowers pay an upfront premium of 1.75% plus annual premiums ranging from 0.45% to 1.05% depending on loan amount and down payment size.
Millbrae buyers appreciate FHA's flexibility with debt-to-income ratios up to 50% in some cases. The program accepts various income sources and allows gift funds for down payments from family members.
VA loans eliminate down payment requirements entirely for eligible veterans and service members. This benefit provides substantial advantages in San Mateo County's competitive housing market.
The Department of Veterans Affairs guarantees these loans without requiring monthly mortgage insurance. Borrowers pay a one-time funding fee ranging from 1.4% to 3.6% based on service type and down payment, though disabled veterans receive exemptions.
VA financing typically offers lower rates than conventional or FHA options. The program also limits closing costs lenders can charge and doesn't impose maximum debt-to-income requirements, reviewing each application individually.
Eligibility represents the fundamental difference between these programs. FHA loans are available to any qualified borrower, while VA loans require military service or marriage to an eligible veteran.
Cost structures vary significantly. FHA borrowers pay ongoing mortgage insurance for the loan's life with minimum down payments, adding substantial monthly expenses. VA loans charge a one-time funding fee but eliminate monthly insurance premiums entirely.
Down payment requirements create another major distinction. FHA requires at least 3.5% upfront cash, while VA allows qualified borrowers to finance 100% of the purchase price. This difference can mean tens of thousands of dollars in initial savings for Millbrae buyers.
Veterans and eligible service members should seriously consider VA loans first. The combination of zero down payment and no monthly mortgage insurance creates unmatched value, often saving hundreds monthly compared to FHA financing.
FHA loans serve buyers without military eligibility who need accessible financing. This option works well for first-time buyers, those with credit scores in the 580-620 range, or anyone who can manage the 3.5% down payment but wants flexibility.
Calculate total costs carefully before deciding. While FHA's lower upfront funding fee seems attractive, monthly mortgage insurance adds up significantly over time. VA borrowers typically save money long-term despite higher initial funding fees.
Your individual circumstances matter most. SRK Capital can analyze both options based on your credit profile, down payment funds, and long-term homeownership plans to identify the most cost-effective path.
Yes, you can choose either program if you're eligible for both. However, VA loans typically offer better terms with no down payment and no monthly mortgage insurance, making them the more cost-effective choice for most military borrowers.
Both programs require homes to meet safety and livability standards through appraisals. VA appraisals are slightly more rigorous regarding property condition, but both FHA and VA will flag major safety issues that need repair before closing.
VA loans generally offer lower interest rates than FHA financing. Rates vary by borrower profile and market conditions, but VA's government guarantee typically results in more competitive pricing from lenders.
Only if you put down 10% or more initially, which removes insurance after 11 years. With the minimum 3.5% down, FHA mortgage insurance remains for the entire loan term unless you refinance.
Veterans with full VA entitlement can borrow above conforming limits without down payments. Those with partial entitlement may need down payments on higher-priced Millbrae homes, but the program remains highly flexible.