Which loan is cheapest for an eligible veteran?

VA, almost without exception. VA loans permit zero down with no monthly mortgage insurance, just a one-time funding fee of 1.25 to 3.30 percent depending on service category and prior VA use. Even with the funding fee included, VA typically beats FHA and conventional for eligible borrowers across nearly all FICO and down payment combinations.

What makes USDA Rural Development unique?

USDA Guaranteed Rural Housing permits zero down with no monthly PMI in eligible rural and suburban areas. Income cap typically 115 percent of area median. Property must be in a USDA-eligible location (most non-urban areas, plus many suburban). Funding fee 1.0 percent upfront and 0.35 percent annual.

How do I choose between these four?

Rank in this order if eligible: VA (eligible veteran or service member) wins on cost. USDA (eligible rural property, income at or below cap) is the next cheapest zero-down option. FHA wins below 660 FICO or with under 3.5 percent down. Conventional wins for 660+ FICO with 5+ percent down on standard primary residence.

FHA vs VA vs USDA vs Conventional

Four programmes cover almost every primary-residence buyer in the US. Eligibility filters narrow your real choices quickly: VA for eligible veterans, USDA for rural buyers under income cap, FHA for lower credit or smaller down payment, conventional for everyone else.

Eligibility matrix

Programme	Borrower requirement	Property requirement
VA	Eligible veteran, active duty, certain reservists, surviving spouses	Primary residence; meets VA Minimum Property Requirements
USDA Guaranteed Rural Housing	Income at or below 115% area median; US citizen or qualified non-citizen	Property in USDA-eligible rural or suburban area
FHA	580+ FICO with 3.5% down; 500 to 579 with 10% down	Primary residence; meets FHA Minimum Property Requirements
Conventional (Fannie/Freddie)	620+ FICO; income within programme limits if HomeReady/Home Possible	Primary, second home, or investment; meets URAR appraisal

Cost components

Cost	VA	USDA	FHA	Conventional
Minimum down payment	0%	0%	3.5%	3%
Upfront fee	1.25 to 3.30% funding fee	1.00% guarantee fee	1.75% UFMIP	None
Monthly MI / fee	None	0.35% annual	0.50 to 0.55%	PMI 0.25 to 1.50%
MI duration	N/A	Life of loan	11 yrs (10%+ down) or life	Cancels at 78% LTV
Funding fee waived	Service-connected disability, Purple Heart recipients, surviving spouses	No	No	N/A

$300k home with 5% down (where applicable), 720 FICO, 5-year hold

Programme	Cash to close	Monthly P&I+MI yr 1	5-yr MI total
VA (0 down, first use)	~$5,000 closing	~$2,005	$0 (funding fee one-time)
USDA (0 down)	~$5,000 closing	~$2,053	~$4,800
FHA (3.5% down)	~$15,500	~$2,075	~$7,700 + UFMIP
Conventional (5% down, 720 FICO)	~$20,000	~$1,990	~$5,800

Numbers illustrative. Eligibility ordering is what matters: VA > USDA > FHA / Conventional depending on FICO.

Decision algorithm

Are you an eligible veteran, active duty, reservist with VA eligibility, or surviving spouse? If yes, get a VA quote first.
Is the property in a USDA-eligible area AND your household income at or below 115% AMI? If yes, get a USDA quote.
Is your FICO below 660 OR your down payment under 5 percent? If yes, FHA is likely your best option (or only).
Otherwise compare conventional (standard or HomeReady/Home Possible if income at or below 80% AMI) against FHA on a 5-year and 10-year cost basis using the calculator on the home page.

Rate disclaimer

VA funding fee and USDA guarantee fee may change annually. Confirm current rates with your lender. Consult a licensed loan officer.

Sources

VA Loan eligibility: va.gov/home-loans
VA Funding Fee rates: va.gov/funding-fee
USDA Rural Development: rd.usda.gov
USDA property eligibility: eligibility.sc.egov.usda.gov
HUD Handbook 4000.1: HUD 4000.1