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Low score: FHA or VA

If you are eligible for both, they are not the same conversation — and the difference is larger at a low score than at a high one.

By Michael Wright · NMLS #134086 Published September 18, 2026

The two rulebooks

FHAVA
Minimum credit score580 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 range10%1None2
Monthly mortgage insurance0.50% to 0.55% a year on a typical loan3 None
One-time charge1.75% 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 ratio31% 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

Why you may have been steered to FHA anyway

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.

1FDIC · Affordable Mortgage Lending Guide — FHA 203(b) mortgage insurance programThe credit score bands and the maximum loan-to-value each allows, the 31 and 43 percent debt ratio guidelines, and the 1.75 percent upfront premium.
2eCFR · 38 CFR §36.4340 — Underwriting standardsCredit analysis rather than a score threshold, the 41 percent debt ratio guideline and what applies above it, and the residual income tables and the 20 percent rule.
3HUD · Mortgagee Letter 2023-05 — Annual mortgage insurance premium reductionAnnual MIP by base loan amount, loan-to-value and term, and how long each rate runs for. Effective for case numbers endorsed on or after March 20, 2023. The base loan amount threshold is the national conforming loan limit.
4VA · VA funding fee and loan closing costsFunding fee rates by loan type and down payment, and who is exempt. Rates effective April 7, 2023.
5HUD · Mortgagee Letter 2019-11 — Maximum LTV and CLTV for cash-out refinancesThe 80 percent ceiling on an FHA cash-out refinance, reduced from 85 percent, effective for case numbers assigned on or after September 1, 2019.
6HUD · Handbook 4000.1 — Glossary and AcronymsThe definitions the arithmetic turns on: Base Loan Amount as the mortgage amount prior to the addition of any financed upfront premium, and loan-to-value as the Base Loan Amount divided by the Adjusted Value.
7eCFR · 38 CFR §36.4306 — Refinancing of mortgage or other lien indebtednessCash-out net tangible benefit tests, the ceiling on the new loan amount, seasoning, and the two required loan comparisons.

Bring us the hard part

The decline, the discharge date, the file nobody would touch

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.

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