FHA vs VA Mortgages - Which One Is Right For You in 2026

In this episode, Jennifer talks about VA versus FHA mortgages, outlining their main differences and when lenders might suggest FHA. She explains scenarios where FHA genuinely makes sense for veterans, like buying a multi-unit without full reserves or purchasing with a non-military partner. Crucially, Jennifer also reveals questionable reasons lenders might push FHA, especially concerning VA's vital residual income calculation. She empowers veterans to ask why FHA is ever suggested.

Transcript

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VA mortgage versus FHA mortgage. Today we're going to talk about when a lender would suggest FHA over VA and what to watch out for as a veteran. Before we start, I've been a lender for close to two decades now. My team is one of the top VA teams in America. So when it comes to understanding VA loans, we know the pros and the cons. We also do FHA. Now I feel like a lot of times veterans get pushed into FHA for no good reason, except the loan officer doesn't understand VA. Let's look at some of the pros and the cons. VA has no mortgage insurance. FHA has mortgage insurance. So what that means is that on a monthly basis, your payment is higher. VA has no minimum down payment. FHA has a 3.5% minimum down payment. If I look at both loans, I'm always gonna go to VA. However, there are a couple times FHA makes more sense. So I'm gonna talk to you about those today, as well as one to watch out for that a lender could do that I don't do because I think it's a bad practice. So number one, when would FHA make more sense? FHA, if you're trying to buy a multi-unit like a two-unit and you don't have reserves, so with a VA mortgage, if you're trying to buy a multi-unit, you need to have at least six months of reserves in order to use rental income. You also need either property management history, two years, or you have to have a property manager manage the property. FHA doesn't have that requirement. So FHA, if you're buying a two-unit property, you don't have to have money stacked aside in the bank, you can use the rental income, a percentage of it, not the full amount, with just putting three and a half percent down. Your payment's gonna be higher with FHA than VA, but if you don't have the savings, you need the income to qualify, you have the down payment, and you really want to get the house, FHA can be a good solution. Now it's important to note that I didn't say a three or four unit. Well, it's true you can buy an FHA house that's three or four units, it does have to pass a self-sustainability test, which most don't. Okay, like that's the bottom line. We're always happy to look at it, but like in terms of how many three to four units we've seen pass the FHA self-sustainability list, it's few and far between. So if you were looking at a duplex, if you didn't have the savings, if you needed the rental history to qualify, and you had some level of a down payment, FHA could make sense. Okay? Let's talk about the other reason FHA would make sense over VA. Let's say you're buying a house with your girlfriend or your boyfriend. They are not military and you are not married. So since they are not military and you are not married, if you did a VA loan, you would have to have a down payment from them for their portion if they're on the loan. So if, for example, let's say you're the military member and you're buying with your girlfriend and you can buy the house without their income, I would say don't put them on the loan. Because if you put them on the loan, they're gonna have to come in with close to 15% down because they're not military and they're not your spouse. Okay. If you're like, oh, I really want to buy with my girlfriend or boyfriend, but they don't have 15% down, what do I do? Do you qualify on your own? No, I have to have them on the loan. FHA. Um, FHA three and a half percent down. Yes, the payment's gonna be higher than VA because you're gonna have mortgage insurance. However, FHA doesn't care if you're married or not. It doesn't, they don't care. So, you know, you can do three and a half percent down. You and your girlfriend or boyfriend can both be on the loan, easy peasy. Whereas VA land, if they're non-military, non-spoused, they want to be on that loan with you, 15% down. Okay? Very important. Now let's talk about the one. I was thinking about this today. There's been an uptick of FHA delinquencies. It's been in the news a lot. I was starting to dig into it and it it made me start thinking about why. And one of the reasons I think FHA has traditionally more delinquencies than VA is because they don't have a residual income calculation. So VA is the only loan that does. And what it is is we look at your debt to income, we look at your credit, we look at everything, but we're also doing a back-end calculation to make sure at the end of the month you have food, you can pay your electricity. There's a it's a residual income calculation. VA allows a very high debt to income, but this residual income calculation keeps people out of trouble. I believe that strongly. And look, it's not often that people don't pass the residual unless there is a problem where they could end up super house poor. FHA allows really high debt to incomes, but it doesn't have a residual income calculation. So there's no back-end calculation that's going, oh, your debt to incomes at 60%, which is really high and dangerous. Let's make sure you can eat. Doesn't exist without loan. So I was thinking about it and I was like, okay, so if a veteran didn't pass the residual income calculation, you know, a sleazy lender could suggest FHA. And I, you know, look, is it sleazy or is it just presenting options? You could present the option of maybe FHA. But then I was like, well, FHA has mortgage insurance, so who would be the actual borrower where this might work from a loan standpoint? Disabled veterans. Disabled veterans, I'm gonna tell you why. So as a disabled veteran, whether it's VA or FHA, we gross up your income. Okay? The reason we do that is because it's non-taxable. Well, VA has the residual income calculation where we take it out. We don't gross it up. Because the bottom line is when you go to pay your food and you go to pay your utilities, it's with the real number you get. It's not with that big magical number that we gross up because you're not paying taxes. Well, with FHA, they would just be grossing up the income, but then there's no residual. So I do think if you're a disabled veteran and you're watching this and you're like, oh my God, John, they told me I couldn't do VA, but they told me to do FHA. Is this why? You gotta ask why. You gotta ask why. And look, as a veteran, if a lender's ever telling you to do FHA over VA, you need to know why. And personally, if a lender was doing FHA because I didn't mat, I didn't hit the VA residual income calculator, I'd be nervous. I would be super nervous because honestly, truly, that calculation is not like cushioning a lot of stuff. It's just making sure you can pay for the basics. So really important you ask these questions. Never just trust a loan officer with the loan they select for you. Look, as a loan officer for a billion years, right? We're just rounding up. I often select programs for clients constantly. But if a client ever said, hey Jen, why this one? I would tell them, there'd be a good reason why, you know, like, and we always talk about it too. Like if you applied with me for a VA loan and I did anything but VA, we would be having a huge conversation before I even did it. Like I wouldn't even flip you without talking about it. You know, if you applied with your girlfriend or your boyfriend, you know, and we looked at it, I'd say, hey, like this is what we can do. Here are your options, or on your own, this is what you qualify for. But what we see in the industry is we'll see that loan officers just go, yeah, you didn't know VA didn't work. Here's FHA. It's good, it's good. They're both government. And sometimes literally, they're just putting you in that program. Maybe they make more money on it. Gross. Maybe they don't know VA. Maybe they don't have someone that they've worked with on VA consistently, so they're uncomfortable. So it's more comfortable for the loan officer to put you in an FHA loan because they understand that loan better. Well, that's not good for you. No, it's not. The only time you should be in an FHA loan instead of VA is the reasons that I gave you. And the one where they're trying to dodge the residual income calculation, that is not a good reason. Okay? So look, questions, comments, has this happened to you? Do you want us to look at what's going on? Are you like, oh my God, that's happening to me now? Should I be in VA? Should I be an FHA? Call us. I say it on this channel all the time and I mean it from my heart. Call us. Like, even if you determine, I don't want to work with you guys, I don't care. We want to help. So if we can help you, if we can shine some light, if we can make a positive impact in your life, that's what we're there for. 786-933-2077. But seriously, honestly, side by side, you qualify for both loans. Which one do you do? VA all day, every day, no mortgage insurance, and the best refi ability out of all the loans. Thanks for watching, guys.