The two rulebooks
| FHA | VA | |
|---|---|---|
| Minimum credit score | 580 for 3.5% down; 500 for 10% down; none below 5001 | None. The regulation requires analysis of the credit data, not a threshold2 |
| Down payment at the bottom of the range | 10%1 | None2 |
| Monthly mortgage insurance | 0.50% to 0.55% a year on a typical loan3 | None |
| One-time charge | 1.75% upfront premium1 | Funding fee, unless you are exempt4 |
| Maximum cash-out | 80% of value, measured before the upfront premium is added5,6 | Set by VA's own rules, with no equivalent cap7 |
| Debt ratio | 31% and 43% as guidelines1 | 41% as a guideline, with residual income as the real test2 |
What the table means at a 520 score
If you are eligible for both, VA is usually not a close call at the bottom of the range. There is no score floor to clear, no down payment, and no monthly mortgage insurance at all — three of the four things that make a low-score FHA loan expensive simply are not in the VA program.
The trade is the funding fee, which is a one-time charge and is waived entirely for a large share of the veterans who ask about it, most often those receiving service-connected disability compensation.4
Because a VA loan at a low score is more work, and because many lenders carry a score overlay that makes it impossible for them regardless. A shop that cannot write the VA file will quote you the FHA file, and nothing in that conversation is obliged to mention the one it could not do.
If you are a veteran and you were quoted FHA, it is a fair question to ask why.
Whichever of the two you end up in, the price you are quoted has a part set by the market and a part set by whoever is writing the loan. Those are worth separating before you accept either one.
When FHA is still the answer
You have no VA entitlement, or the property does not meet VA's requirements, or the entitlement is partially used and the arithmetic lands somewhere awkward — entitlement is its own page. FHA is also the program for a non-veteran co-borrower structure that VA cannot accommodate.
The point is not that one program beats the other. It is that at a low score the gap between them is wide enough that the comparison should be run, and it very often is not.
Sources
These references support the factual explanations above. Where this page states a preference rather than a fact, it says so — those are our editorial judgement, not a claim that any one channel always costs less.
Next
What a 500–579 score costsIt changes the down payment and it shortens the list of lenders. It does not end the conversation.VA loans with a low credit scoreVA sets no minimum score. The number that stopped you came from a lender, not from VA.Bring us the hard part
Whatever you have — a decline letter, a discharge order, a date you are not sure of. We will tell you honestly where you stand, including the version where the answer is to come back in six months. That conversation is free and it is not an application.