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Is the VA Loan Really 0% Down?


If you've heard of the VA loan you've probably heard that it's 0% down. But what does that actually mean and how can be it $0 down? If you've ever tried to get a home loan, other than the VA loan, you've certainly seen what a downpayment is. Depending on the loan product that you're looking at, a downpayment could be anywhere from 3% to 20% of the home's purchase price that's required for you to pay in order for you to qualify for that loan.

A VA loan actually does have a down payment, but it comes from your service in the military. The government, through Ginnie Mae, is actually financing 25% of the purchase and guaranteeing that loan in the same way that you would be doing with a down payment on a conventional loan. While that does mean you're able to have a 0% or $0 downpayment, it doesn't necessarily mean that it's $0 or 0% out of pocket for the rest of the transaction.

For most people, you actually will have a VA loan funding fee. The first time you purchase a house, that fee will be 2.3%. The second time you purchase a house, meaning yes, you can reuse the VA loan it's 3.6%. Should you find yourself ever refinancing a home the VA funding fee is going to be 0.5%.

The good news is that if you meet any of the requirements below stated on, the VA funding fee will be waived entirely:

  • You receive VA compensation for a service-connected disability or

  • Eligible to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead, or

  • The surviving spouse of a Veteran who died in service or from a service-connected disability, or who was totally disabled, and you're receiving Dependency and Indemnity Compensation (DIC), or

  • A service member with a proposed or memorandum rating, before the loan closing date, saying you're eligible to get compensation because of a pre-discharge claim, or

  • A service member on active duty who before or on the loan closing date provides evidence of having received the Purple Heart

Not having to put any money down on a VA loan will require some participation from your lender, agent, and likely even the home seller that you're purchasing the property from. You, the buyer, may be able to negotiate with the seller who pays for your remaining closing costs. Having an experienced agent who is good at negotiation is key for this step as they will be the ones who can successfully lead you to a $0-down home buying experience with the VA loan.


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