VA Loan Down Payments: The Truth About Zero Down

How Much Money Do You Need Down for a VA Loan?

Here’s an amazing fact that surprises many veterans: you can literally buy a house with no out-of-pocket cash using your VA loan benefit. The only upfront cost you’ll face is the VA appraisal fee, and even that can be refunded to you at closing. Yes, you read that right – it’s possible to become a homeowner with virtually no money out of pocket.

What Are the Common Misconceptions About VA Loan Down Payments?

Let’s clear up some persistent myths about VA loans and down payments:

“You need at least some money down” – False. The VA loan benefit was specifically designed to offer 100% financing. You really can buy a home with no down payment.

“Zero down means bad loan terms” – False. VA loans often offer better terms than conventional loans, even with no money down. This is because they’re backed by the VA, reducing the risk for lenders.

“No down payment means you’ll pay monthly mortgage insurance” – False again. Unlike conventional loans, VA loans never require mortgage insurance, even with zero down.

“You’ll need a huge savings account” – Not true. While having savings is always good, you don’t need a large bank account balance to qualify for a VA loan.

---

“Home promise is an amazing company to work with. They made our home owning dream come true”  – Kalee R. 

Bad Credit VA Loans: What You Need to Know About Qualification

What Credit Score Do You Need for a VA Loan?

Here’s something that might surprise you: the VA’s official lending handbook doesn’t set a minimum credit score requirement. That’s right – the VA itself doesn’t have a specific credit score cutoff. This is fantastic news if you’re worried about credit challenges, but there’s more you need to know about how VA loans and credit scores really work.

Why Do Different Lenders Have Different Credit Score Requirements for VA Loans?

While the VA doesn’t set a minimum credit score, most lenders add their own requirements – and these can vary dramatically. You could call ten different lenders and get ten different answers about minimum credit scores. This is where choosing the right lender becomes crucial.

At HomePromise, we take a unique approach. We stick to the VA’s guidelines without adding extra restrictions. This means we can often help veterans who’ve been turned down by other lenders. If you’ve been told your credit score is too low for a VA loan, don’t give up until you’ve talked with us.  Our minimum credit score is a very low 580 for VA loans.

---

“HomePromise transformed what once felt like an impossible dream—owning a home—into a beautiful reality.”  – Denise W. 

Is It Really Possible to Buy a House with No Down Payment?

Absolutely! The VA loan program offers one of the most powerful benefits in the mortgage industry: 100% financing. This means no down payment is required, and the seller can even pay all your closing costs. This unique feature of VA loans makes homeownership accessible to veterans who haven’t had the opportunity to save large amounts of money.

What Should I Know About VA Appraisals and Earnest Money?

The VA appraisal process is a crucial part of your home purchase, and it’s important to understand how it works with your down payment plans.

Understanding the VA Appraisal:

• Required for all loans for home buyers, whether you’re making a down payment or not
• Must be completed by a VA-approved appraiser
• Typically costs between $500-$800, depending on your area
• Needs to be paid before the appraisal is conducted
• Can be refunded at closing if negotiated with the seller
• Usually takes 7-10 business days to complete

The timing of the appraisal matters too. We recommend ordering it as soon as your offer is accepted to avoid delays in closing. Remember, while this is an upfront cost, it’s protecting your interest by ensuring the home is worth what you’re paying.

As for earnest money deposits, this is where many veterans can save even more. Here’s what you need to know:

Earnest Money Facts:

• The amount is negotiable with the seller
• Typically ranges from 1-3% of purchase price
• Can sometimes be as low as $500-1000 in some markets
• Becomes part of your down payment or closing costs if the sale goes through
• Usually refundable if the deal falls through for reasons specified in the purchase agreement
• Can sometimes be reduced or waived entirely

How Do Current Market Conditions Affect Down Payment Decisions?

Market conditions can significantly impact your down payment strategy. In a buyer’s market, you might have more flexibility to go with no down payment and even negotiate for the seller to pay closing costs. However, in a competitive seller’s market, a down payment might strengthen your offer.

Current Market Considerations:

• Competitive markets might require stronger offers
• A down payment can sometimes make your offer more attractive
• Making a large earnest money deposit may  help your offer compete
• Market conditions can affect seller willingness to pay closing costs

Smart strategies for different markets:

In a Buyer’s Market:

• Take full advantage of zero down
• Negotiate for seller to pay closing costs
• Consider a lower earnest money deposit
• Ask for seller concessions

In a Seller’s Market:

• Consider a down payment to strengthen your offer
• Make a larger earnest money deposit
• Keep purchase agreement contingencies to a minimum
• Be prepared for faster closing timelines

Talk to a VA home loan expert to 800-720-0250 get more information about how to structure your home purchase offer.

Why Would I Make a Down Payment If I Don’t Have To?

While the zero-down option is fantastic, there are some compelling reasons to consider making a down payment if you can afford it. Here’s what happens when you put money down:

At 5% down:

• Your funding fee drops significantly to 1.5%
• You’ll have instant equity in the home
• Your monthly payments will be lower
• You’ll pay less interest over time

At 10% down:

• Your funding fee drops even further to 1.25%
• You’ll have substantial equity right away
• Your monthly payments will be even lower
• You’ll save even more on long-term interest

How Do Different Down Payment Options Affect My Overall Costs?

Let’s look at how different down payment choices impact your total cost of homeownership:

With No Down Payment:

• No money required upfront (except appraisal)
• Higher funding fee [Learn more about funding fees here]
• Higher monthly payments
• Maximum loan amount

With 5% Down:

• Lower funding fee
• Reduced loan amount
• Lower monthly payments
• Immediate equity building

With 10% Down:

• Lowest possible funding fee
• Significantly reduced loan amount
• Lowest monthly payments
• Substantial initial equity

What Are My Options for Covering Closing Costs?

One of the best features of VA loans is the flexibility in handling closing costs. You have several options:

The seller can pay all your closing costs. In many cases, you can negotiate for the seller to cover these expenses as part of your purchase agreement. This is a common practice with VA loans and can significantly reduce your out-of-pocket expenses.

You can also roll certain closing costs into your loan amount, namelythe VA funding fee. This means you don’t have to pay for the funding fee upfront – it simply becomes part of your monthly payments.

What’s This About Getting the Appraisal Fee Back?

Let’s talk about that appraisal fee – typically your only required upfront cost. Here’s how it works:

1. You’ll need to pay for the VA appraisal before it’s conducted
2. This cost becomes part of your closing costs
3. If you’ve negotiated for the seller to pay closing costs, or if you’re rolling costs into your loan, you can get reimbursed for the appraisal fee at closing

How Do I Decide What Down Payment Option Is Best for Me?

Consider these factors when deciding whether to make a down payment:

Current Savings:

• How much money do you have available?
• What other expenses might you need to cover soon?
• Do you need to maintain emergency savings?

Monthly Budget:

• How much can you comfortably afford each month?
• Would lower monthly payments be worth a down payment?
• Have you considered monthly the cost of property taxes and insurance?

How Do I Get Started with My VA Loan?

Whether you’re planning to use the zero-down option or make a down payment, the first step is understanding all your choices. We can help you run the numbers and see exactly how different down payment amounts would affect your:

• Monthly payments
• Funding fee
• Total loan costs
• Long-term savings

APPLY ONLINE NOW and let our VA loan specialists show you what’s really possible. We’ve helped countless veterans achieve homeownership when they thought they couldn’t qualify. Your VA loan benefit is too valuable to let myths hold you back from using it.

Remember, VA loans are more flexible than conventional loans, and we’re here to help you navigate the process. Even if other lenders have turned you down, we may be able to help. The key is working with a lender who truly understands VA loans and is committed to helping veterans achieve homeownership.

Ready to get started? Call 800-720-0250 or APPLY ONLINE NOW and let our VA loan specialists guide you through each step with confidence.

Take Action with HomePromise

Call HomePromise at 800-720-0250 today! Get a free consultation and expert guidance to unlock your full benefits and turn your dream home into reality. We’ll be with you every step of the way. Call now, don’t wait!