Do You Need a Down Payment for a VA Loan?

Service members and veterans can secure a home loan backed by the Department of Veterans Affairs (VA). These loans make homeownership more accessible by often eliminating barriers found in conventional mortgage options. A common question is whether a down payment is required, which distinguishes VA loans from many others.

No Down Payment Typically Required

A primary feature of a VA home loan is that it does not require a down payment for eligible borrowers. This is a substantial advantage compared to conventional loans, which often necessitate a down payment of at least 3% of the home’s purchase price. The ability to purchase a home with no money down can significantly reduce the upfront financial burden for service members and veterans.

This unique benefit stems from the VA’s guarantee to private lenders. The VA guarantees a portion of the loan, typically 25% of the loan amount, which substantially reduces lender risk. This federal backing also removes the need for private mortgage insurance (PMI), a monthly fee typically required on conventional loans when a borrower puts down less than 20%. The absence of PMI can lead to considerable savings both at closing and over the life of the loan.

Eligibility for VA Home Loans

Accessing VA loan benefits requires meeting specific eligibility criteria. Active-duty service members, veterans, National Guard members, Reserve members, and certain surviving spouses may qualify. The required length and character of service vary by period, with common requirements including 90 consecutive days of active service during wartime or 181 days during peacetime.

Applicants must obtain a Certificate of Eligibility (COE) from the VA to demonstrate eligibility. This document confirms service requirements and outlines available loan entitlement. While essential for the loan process, a COE is not always required to begin exploring options with a lender. Lenders can often assist in obtaining this document, which is necessary before loan closing.

The VA Funding Fee

While VA loans do not require a down payment, most borrowers will encounter a one-time charge known as the VA Funding Fee. This fee is paid directly to the Department of Veterans Affairs and helps offset program costs for U.S. taxpayers. The fee amount is calculated as a percentage of the loan amount and varies based on several factors.

Factors influencing the funding fee include whether it is the borrower’s first time using the VA loan benefit, the amount of any down payment, and the loan type. For first-time users with no down payment, the fee is 2.15% of the loan amount, increasing to 3.3% for subsequent uses without a down payment. Making a down payment of 5% or more can reduce the fee to 1.5%, and 10% or more can lower it to 1.25% for both first-time and subsequent users.

The VA Funding Fee can be paid upfront at closing or, in most cases, financed into the total loan amount. Financing the fee reduces immediate out-of-pocket costs but increases the overall loan balance and total interest paid. Certain veterans are exempt from paying the funding fee, including those receiving VA disability compensation, those eligible for compensation based on a pre-discharge exam, Purple Heart recipients, and certain surviving spouses.

Scenarios Involving Down Payments

While the zero-down payment feature is a hallmark of VA loans, a down payment may be required or strategically chosen in specific situations. A down payment becomes necessary if the home’s purchase price exceeds its appraised value, as the VA only guarantees up to the appraised amount. Borrowers would then need to cover the difference out-of-pocket.

A down payment may also be required if a borrower does not have their full VA loan entitlement restored or if the loan amount exceeds county-specific limits. For example, the standard VA loan limit for 2025 is $806,500 in most counties, with higher limits up to $1,209,750 in high-cost areas. If a borrower’s loan amount surpasses their available entitlement relative to these limits, a down payment may be necessary to cover the difference.

Some borrowers choose to make a down payment voluntarily, even when not required. This decision offers several financial advantages, such as reducing the overall loan amount, lowering monthly mortgage payments, and decreasing total interest paid. A down payment also reduces the VA Funding Fee, as the fee percentage decreases with larger down payment amounts. Additionally, making a down payment builds immediate equity and can make an offer more competitive in a strong housing market.