FHA, VA, and USDA loans: low and no down payment home loans
FHA, VA, and USDA loans are made by private lenders and backed by the federal government, which is why they are often called government loans. FHA loans are insured by HUD's Federal Housing Administration, VA loans are guaranteed by the Department of Veterans Affairs, and USDA guaranteed loans cover eligible rural and some suburban areas. That backing lets lenders offer lower down payments or more flexible credit standards to eligible borrowers buying a home to live in.
How FHA, VA, and USDA loans work
FHA, VA, and USDA loans are mortgages made by private lenders but insured or guaranteed by a federal agency. If the borrower defaults, the agency covers part or all of the lender's loss. That protection is what allows lenders to accept smaller down payments or more flexible credit profiles than they might on a conventional loan.
There are three main types. Federal Housing Administration (FHA) loans are insured through the U.S. Department of Housing and Urban Development (HUD). Department of Veterans Affairs (VA) loans are partly guaranteed by the VA. U.S. Department of Agriculture (USDA) guaranteed loans are backed by USDA Rural Development.
You still apply with a lender, not with the agency. The agency sets the program rules, and each lender can add its own requirements on top of them. So the agency minimums described on this page are the floor, and what a particular lender requires may differ.
FHA loans: low down payment with mortgage insurance
An FHA loan is a mortgage insured by HUD's Federal Housing Administration, most commonly through the Section 203(b) program for buying or refinancing a home. According to HUD, borrowers with credit scores of 580 or higher can qualify for a minimum down payment of 3.5 percent.
FHA loans are often a fit for first-time buyers, buyers with modest savings, and people whose credit history is still building or recovering. Lenders still verify income, employment, and assets, and they review your debt-to-income (DTI) ratio. Individual lenders may set credit or DTI standards above HUD's minimums.
FHA loans are for homes you will live in as your primary residence. The home must also meet FHA property standards, which an FHA appraisal checks. FHA also sets maximum loan amounts by county, and those limits are higher in high-cost areas. If you are shopping for an FHA loan, ask your lender for the current limit in your county before you set a price range, because a home above that limit will need a different type of loan. You can read the program basics on HUD's 203(b) page.
How FHA mortgage insurance premiums work
Every FHA loan carries mortgage insurance premiums (MIP), which fund the insurance that protects the lender. FHA mortgage insurance generally has two parts: an upfront premium, usually added to the loan amount, and an annual premium paid as part of your monthly payment.
This is a key difference from conventional private mortgage insurance (PMI). Conventional PMI can generally be canceled once you build enough equity. FHA mortgage insurance follows HUD's own rules, and on many FHA loans it lasts much longer, in some cases for the life of the loan. The premium amounts and how long they last depend on HUD rules that change over time, so ask your lender for the current terms in writing.
Some borrowers start with an FHA loan and later refinance into a conventional loan once they have more equity, partly to end mortgage insurance. Whether that makes sense depends on rates and closing costs at the time.
VA loans for service members, veterans, and surviving spouses
A VA loan is a mortgage partly guaranteed by the Department of Veterans Affairs for eligible service members, veterans, and some surviving spouses. According to the VA, eligible borrowers with full entitlement can often buy a home with no down payment.
Eligibility is based on military service, and you show it with a Certificate of Eligibility (COE), which a lender can often request for you. Entitlement is the amount the VA will guarantee. If part of your entitlement is tied up in another VA loan, a down payment may be needed.
VA loans do not require monthly mortgage insurance. Lenders still review your credit, income, and residual income, and they may set standards beyond VA minimums. VA loans are for a home you will occupy as your primary residence. See the VA's home loan overview for eligibility details.
VA loans can also be used to refinance. Eligible borrowers may be able to refinance an existing VA loan or move a non-VA loan into a VA loan, including with cash out, subject to VA and lender rules.
The VA funding fee and who may be exempt
Most VA borrowers pay a one-time VA funding fee, which helps fund the program for future borrowers. The fee can usually be paid at closing or rolled into the loan amount.
The VA sets the fee, and the amount depends on factors such as the type of loan, your down payment, and whether you have used a VA loan before. The VA publishes the current fee tables, so rely on that source rather than an estimate.
Some borrowers are exempt. According to the VA, these include many veterans who receive VA disability compensation, along with certain other groups the VA defines. If you think you may qualify, check the VA's funding fee and closing costs page and confirm that your exemption appears on your Certificate of Eligibility.
USDA guaranteed loans: property and income eligibility
A USDA guaranteed loan is a mortgage backed by the U.S. Department of Agriculture for homes in eligible areas, for households whose income is within USDA limits. Eligible borrowers can buy with no down payment required.
Two eligibility tests apply. First, the property must be in an area USDA designates as eligible. Many of these are rural, but some are suburban areas outside larger cities, so it is worth checking even if you do not think of your area as rural. Second, your household income must be within the USDA limit for that area, and the limit counts the income of everyone in the household, not only the borrowers on the loan.
You can check both tests on the USDA eligibility site. USDA guaranteed loans are for a primary residence, and lenders review credit, income, and debts under USDA and their own guidelines. USDA loans also carry guarantee fees set by USDA.
FHA, VA, and USDA loans are for a home you live in
FHA, VA, and USDA loans are designed for primary residences. You generally must intend to move in within a set time after closing and live there as your main home. These programs are not meant for investment properties or vacation homes.
If you want to finance a rental property, look at an investor option instead. A debt service coverage ratio (DSCR) loan, for example, qualifies an investment property based on its rental income rather than your personal income. Conventional loans also allow second homes and investment properties under Fannie Mae and Freddie Mac rules.
Misstating how you will use a property on a mortgage application is a serious matter. If your plans are uncertain, tell your loan officer so you can choose the right type of loan from the start.
When a conventional or self-employed loan may fit better
A government loan is not always the best choice. If you have strong credit and a larger down payment, a conventional loan may cost less over time, partly because conventional private mortgage insurance can be removed. Some conventional programs also allow as little as 3 percent down for qualifying buyers. Our conventional loans overview explains how those options work.
A Non-QM loan may fit when you cannot document income the way FHA, VA, USDA, and conventional programs require. That includes self-employed borrowers who qualify better on bank statements than tax returns, investors buying rentals, and borrowers relying on assets rather than a paycheck. Non-QM loans usually carry higher rates and sometimes prepayment penalties, so they are typically worth considering only when an FHA, VA, USDA, or conventional loan does not work.
To compare your options, talk to Mortza. The AI advisor reviews your scenario and outlines possible paths, then a licensed loan officer confirms which loans you actually qualify for. The AI does not approve loans.
Common questions
Does the government lend me the money on an FHA, VA, or USDA loan?
Usually not. For FHA, VA, and USDA guaranteed loans, a private lender makes the loan and the federal agency insures or guarantees it. The agency sets program rules, and the lender reviews your application, funds the loan, and may add its own requirements. You apply with a participating lender, not with HUD, the VA, or USDA.
What is the minimum down payment on an FHA loan?
According to HUD, borrowers with credit scores of 580 or higher can qualify for a minimum down payment of 3.5 percent on an FHA loan. Lenders may set their own credit standards above HUD's minimum. FHA loans also carry mortgage insurance premiums, so factor that cost into your monthly payment when you compare loans.
Do VA loans really require no down payment?
Often, yes. According to the VA, eligible borrowers with full entitlement can often buy with no down payment, as long as the lender's requirements are met. If part of your entitlement is already in use on another VA loan, you may need a down payment. Your Certificate of Eligibility shows your entitlement status.
Who is exempt from the VA funding fee?
According to the VA, some borrowers are exempt from the funding fee, including many veterans who receive VA disability compensation, along with certain other groups the VA defines. Exemption status generally appears on your Certificate of Eligibility. Check the VA funding fee page and confirm with your lender before closing.
Can I get a USDA loan if I do not live in the country?
Possibly. USDA eligible areas include many rural places and some suburban areas outside larger cities. Eligibility depends on the specific property address, not on how the area feels. Enter the address on the USDA eligibility site to check, and use the same site to see whether your household income falls within the limit.
Can I use an FHA, VA, or USDA loan to buy a rental property?
Generally no. These programs are designed for a home you will live in as your primary residence. If you want to buy a property to rent out, consider a conventional investment property loan or a Non-QM investor loan such as a DSCR loan, which qualifies the property based on its rental income.