Should a veteran use FHA or VA to buy a home?
VA wins in almost every category: $0 down payment vs FHA's 3.5%, no mortgage insurance vs FHA's permanent MIP, no loan limit vs FHA's $541K cap, and reusable entitlement. The only edge FHA holds is a higher DTI allowance (56.9%; VA has no hard DTI cap) and broader condo eligibility. For MacDill AFB families, VA paired with Hometown Heroes typically delivers the lowest total cost.
The Head-to-Head Comparison
Every major difference between FHA and VA on a $400,000 Tampa Bay purchase:
| Feature | VA Loan | FHA Loan |
|---|---|---|
| Down Payment | $0 | 3.5% ($14,000) |
| Monthly Insurance | $0 (none ever) | ~$183/mo for life |
| Upfront Fee | 1.25-3.3% funding fee* | 1.75% UFMIP ($7,000) |
| *Fee Waiver | Waived for 10%+ disability | Never waived |
| Income Limit | None | None |
| Loan Limit | None (full entitlement) | $541,287 |
| Max DTI | No hard cap (residual income test) | Up to 56.9% |
| First-Time Buyer? | Not required | Not required |
| Reusable? | Yes. Unlimited uses | Yes |
| Seller Concessions | 4% of purchase price | 6% of purchase price |
| Hometown Heroes Stack | Yes. No course, no FTB req | Yes. Course + FTB required |
The Monthly Cost Difference Is Staggering
On a $400,000 home at 6.5% interest:
Includes the difference in P&I (higher FHA loan amount due to UFMIP) plus monthly MIP. VA funding fee financed.
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The One Scenario Where FHA Might Beat VA
VA has no hard DTI cap, underwriters focus on residual income (the cash left after all bills) rather than a fixed percentage. However, if residual income is tight, VA underwriters may require compensating factors. FHA stretches to 56.9% DTI with strong reserves. Veterans with high car payments, student loans, or other debts might qualify for more house through FHA, even though VA is cheaper monthly.
Barrett's recommendation: Always run VA first. If VA underwriting pushes back on DTI, switch to FHA as the backup. Never start with FHA if you have VA eligibility, you leave money on the table.
VA + Hometown Heroes = The Ultimate Stack
When a veteran uses VA paired with Hometown Heroes:
- VA: $0 down, $0 monthly insurance
- Heroes: Up to 5% forgivable for closing costs
- No first-time buyer requirement (veteran exempt)
- No homebuyer education course (veteran exempt with VA loan)
- Typical out-of-pocket at closing: $0 to $500
On a $400,000 home, that is $20,000 in closing cost coverage with zero down payment. Most MacDill families close with nothing out of pocket when seller concessions are added.
Related Comparisons and Programs
- FHA vs Conventional, for non-military buyers
- VA vs USDA, comparing two zero-down paths
- VA Loan Full Guide
- FHA + DPA Stacking
- Hometown Heroes
- Assumable Mortgages, take over a 2.75% rate
Helpful Resources
Frequently Asked Questions
Should veterans use FHA or VA?
VA wins in almost every scenario. Zero down payment, no PMI ever, no income limits, and reusable entitlement. The only scenario where FHA might win is if you have a very high DTI (FHA allows up to 56.9%; VA has no hard DTI cap but uses residual income as the primary test) or if you are buying a condo in a non-VA-approved complex. For most MacDill AFB families, VA is the clear winner.
Does VA have mortgage insurance?
No. VA loans have no monthly mortgage insurance of any kind. There is a one-time VA funding fee (1.25-3.3% of the loan), but veterans with a 10%+ service-connected disability are exempt from even that. FHA charges both an upfront MIP (1.75%) and annual MIP (0.55% on 30-year loans above 95% LTV) for the life of the loan.
Can you stack VA with Hometown Heroes?
Yes, and this is a powerful combination. VA covers 100% of the purchase price with $0 down, and Hometown Heroes provides up to 5% as a forgivable second mortgage to cover closing costs. Veterans are exempt from both the first-time buyer requirement and the homebuyer education course.
Which loan type has a higher loan limit?
VA loans have no loan limit for eligible veterans with full entitlement, you can borrow as much as a lender will approve. FHA is capped at $541,287 for a single-family home in Hillsborough, Pinellas, and Pasco counties. For higher-priced homes, VA is the only government-backed zero-down option.
Can a non-veteran spouse use a VA loan?
The veteran must be the borrower or co-borrower on the loan. A non-veteran spouse can be a co-borrower, but the loan uses the veteran's entitlement. If only the non-veteran spouse qualifies income-wise, FHA or conventional may be necessary. Surviving spouses of service members who died in the line of duty can use VA independently.
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