VA loan vs. FHA loan : Pros and Cons?

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VA loan vs. FHA loan : Pros and Cons?

Mike Hoherchak
Bethlehem, PA · Member since 2015 · 27 posts · 8 votes

I'm a new investor looking for my first investment property. What I'm looking to do is purchase a 3-plex or 4-plex to live in one unit and rent out the others. Aside from seller financing, I'm looking into conventional financing.

I'm ex-military and qualify for a VA loan but when talking to a mortgage broker, he was trying to sell me on using a FHA loan instead. I'm curious to know from people who have had experience dealing with both loans and what may be the better option for an owner-occupied loan structure. If location matters due to local laws, I'm looking to live in Pennsylvania or Florida. Thanks in advance for anyone's help and insight!

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  • Upen PatelPro Member
    Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
    10y
    @Mike Hoherchak Your mortgage broker is not serving you and/or they don't know to do a VA loan. Not everyone does.

    Between a VA & FHA loan, VA is the better choice.

    * VA - 0% down, NO PMI
    * FHA - 3.5% down, Monthly PMI

    FHA has a upfront MIP. Depending on your service and disability level, you might or might not have any MIP for your VA loan.

    Upen Patel, Mortgage Banker

    Federal NMLS# 1374243

    [email protected]571-200-6180
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  • Franklin Romine
    Visalia-Fresno, CA · Member since 2009 · 1k+ posts · 863 votes
    10y

    @Mike Hoherchak VA loan is a good product.

    Like what Patel is saying.  The person or persons helping you make your decision on the loan product should be subject matter expert.   It took me several years to find the right lenders, insurance people, tax people, etc.  Once you connect the dot with the right people everything clicks in place.


    Frank

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  • Marques Wood
    Lender · Roseville, CA · Member since 2015 · 10 posts · 0 votes
    10y

    VA 100%, no monthly MI, DTI to 55%, 580 fico required, 3.3% funding fee ( unless 1st time use) first time use is 2.20%

    FHA, 3.5 % down, 1.75% funding fee ( UFMIP ), DTI to 55% > 620 Fico.

    If you are buying a condo and using FHA or VA , needs to be an approved condo.

    VA has looser requirements for condo approval.

    Both allow for the grossing up of non taxable income to qualify ( like Social Security Income ) VA uses 115% and FHA is some cases will use 125% ( for now )

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  • Mike Hoherchak
    OP
    Bethlehem, PA · Member since 2015 · 27 posts · 8 votes
    10y

    Thank you gentlemen! I appreciate the feedback!

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  • Scott Lewis
    Developer / Investor · Denver, CO · Member since 2014 · 64 posts · 31 votes
    10y

    Mike, I'm a vet and if you have a down payment and good credit, a VA loan is not the best choice. While everyone tells you there is no PMI, there is the funding fee (unless you currently have a disability rating which waives the funding fee, then a VA loan is a good choice) which makes the VA loan expensive.

    If you're looking to get into a multiunit property, I recommend finding one that needs some loving, use an FHA 203k loan to purchase and renovate the property, move into one of the units and then refi into a conventional loan.

    If you've down the deal right, your renovations should force appreciate the property enough to give you the LTV necessary for conventional financing without PMI. (My wife and I did this on our primary home and I refi'd into a VA loan, but I have a disability rating so no funding fee.)

    And you might be eligible to get a refund on the upfront PMI required for the FHA loan.

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