USDA vs FHA vs VA vs Conventional Loans

Borrower-Friendly Comparison (With Funding Fees)

USDA Loan (0% Down)

Best for: Rural/suburban buyers with low to moderate income

Down Payment: 0%

Credit: Typically 620+

Costs

  • Upfront Guarantee Fee: 1%
  • Annual Mortgage Insurance (MI): 0.35% (paid monthly for the life of the loan)

Notes

  • Must meet area and income limits
  • Primary residence only

FHA Loan (3.5% Down)

Best for: Buyers with lower credit scores or higher debt

Down Payment: 3.5% (with 580+ credit score)

Credit: Very flexible

Costs

  • Upfront Mortgage Insurance Premium (MIP): 1.75%
  • Annual MIP: Usually 0.55% (varies)
  • MIP lasts for life of the loan unless you put 10% down, in which case it lasts 11 years

Notes

  • Primary residence only
  • Property must meet FHA standards

VA Loan (0% Down)

Best for: Veterans, active-duty service members, and eligible surviving spouses

Down Payment: 0%

Credit: Flexible (often 580 to 620+)

Costs

  • No monthly mortgage insurance
  • VA Funding Fee:
    • 0% for disabled veterans
    • 2.15% for first-time use with 0% down
    • 3.3% for subsequent use with 0% down

Notes

  • Must have VA eligibility
  • Primary residence only

Conventional Loan (3% to 20% Down)

Best for: Buyers with stronger credit or larger down payments

Down Payment: 3% to 20%

Credit: 620+ (better credit generally means better pricing)

Costs

  • Private Mortgage Insurance (PMI) required with less than 20% down
  • PMI can be removed once 20% equity is reached

Notes

  • Can be used for a primary residence, second home, or investment property

Quick Comparison Table

Feature USDA FHA VA Conventional
Down Payment 0% 3.5% 0% 3% to 20%
Upfront Fee 1% 1.75% 0% to 3.3% None
Monthly MI Yes Yes No Yes (if under 20% down)
MI Duration Life of loan Life of loan (unless 10% down) None Removable
Credit Flexibility Medium High High Medium
Income Limits Yes No No No
Location Limits Yes No No No

Simple Summary

  • USDA: 0% down with low mortgage insurance, but subject to area and income limits.
  • FHA: Great option for borrowers with lower credit scores, though mortgage insurance costs are higher.
  • VA: No mortgage insurance, competitive rates, and 0% down. Typically the best option for eligible veterans.
  • Conventional: Ideal for borrowers with stronger credit. PMI can eventually be removed.