VA Home Loans and Down Payments: What Veterans Need to Know

VA loans don't require a down payment, but you still have costs to cover

A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs that lets you buy a home with zero down payment. You don't need to save 3%, 5%, or 20% before you close. Instead, you borrow the full purchase price (up to the VA's limit for your area), and the VA guarantees a portion of that loan to the lender. This may provide is what makes lenders willing to lend without requiring you to put money down first.

However, zero down payment does not mean zero cost. You will pay a VA funding fee — a one-time charge that goes to the VA and is usually rolled into your loan amount. You will also pay closing costs, which typically run 2% to 5% of the purchase price and cover things like the appraisal, title search, and lender fees. Some of these costs can be negotiated or paid by the seller, but you need to understand what you owe before you sign.

Key Takeaways

• VA loans require no down payment, but you must pay a VA funding fee (usually 2.3% to 3.6% of the loan amount) unless you are exempt.
• You still owe closing costs, which typically range from 2% to 5% of the purchase price and cover appraisal, title, and lender fees.
• Your VA Certificate of may be able to access proves your military service and is required before any lender will process your application.
• The VA loan limit varies by county and year, so your maximum borrowing power depends on where you want to buy.
• Some closing costs and the funding fee can be negotiated with the seller or lender, so ask before you assume you pay everything out of pocket.

How the VA funding fee works and who pays it

The VA funding fee is a percentage of your loan amount that compensates the VA for the risk it takes by guaranteeing your loan. The fee is not an interest rate — it is a one-time charge. For most first-time VA loan users, the fee is 2.3% of the loan amount. If you have used a VA loan before, the fee is 3.6%. If you are buying a manufactured home or a property with a VA loan that is being assumed (taken over), the fee may be different.

You do not pay this fee upfront in cash. Instead, it is added to your loan balance, so you finance it over the life of the mortgage. If you are buying a $300,000 home with a 2.3% funding fee, the fee is $6,900, and that $6,900 is borrowed as part of your loan. You pay interest on it just like the rest of the mortgage.

Some veterans are exempt from the funding fee entirely. You are exempt if you are receiving VA disability compensation or if you are a surviving spouse of a veteran who died in service or from a service-connected disability. If you think you may have access to for an exemption, you will need to provide proof when you apply — usually a VA disability rating letter or a Certificate of may be able to access that shows your exemption status.

Getting your Certificate of may be able to access

Before any lender will work with you, you need a Certificate of may be able to access (COE). This document proves to the lender that you served in the military and that the VA has determined you are may be able to access for a VA loan. You cannot get a mortgage without it.

You can request a COE online through VA.gov, by mail, or in person at a VA regional office. The online method is fastest — you can apply through the VA's eBenefits portal or the new VA.gov login system, and you will receive your certificate within minutes or a few days. If you apply by mail, send VA Form 26-1880 to your regional VA office, and expect to wait two to four weeks. If you already have a COE from a previous VA loan, you can reuse it.

When you apply for the COE, you will need to provide your military discharge papers (typically a DD Form 214 or equivalent). If you are still on active duty or in the Reserve or National Guard, different rules apply — ask your lender or the VA which documents you need. Once you have your COE, give it to your lender immediately so they can move forward with your application.

Closing costs you will owe

Closing costs are the fees charged by the lender, title company, appraiser, and other parties involved in the sale. For a VA loan, these typically include an appraisal fee (usually $400 to $600), a title search and insurance ($500 to $1,500), a credit report fee ($25 to $75), and lender fees that vary widely. Some lenders charge an origination fee (a percentage of the loan), while others charge a flat processing fee. The total usually falls between 2% and 5% of the purchase price.

The VA has rules about which closing costs you can and cannot be charged. You cannot be charged for a VA appraisal (the lender must pay for it), and you cannot be charged for a VA inspection. You also cannot be charged for a VA funding fee by the seller — that is your responsibility. However, you can negotiate with the seller to cover some or all of your other closing costs as part of the sale agreement. Many sellers will pay closing costs to make the deal attractive, especially in a buyer's market.

Ask your lender for a Loan Estimate within three days of applying. This document lists every closing cost you will owe and is required by federal law. Review it carefully and ask questions about any fee you do not understand. If a fee seems high, get quotes from other lenders — closing costs vary, and shopping around can save you hundreds of dollars.

VA loan limits by county and how they affect your borrowing power

The VA does not set a maximum loan amount, but it does set a VA loan limit for each county. This limit is the amount the VA will may provide, and it affects how much a lender will lend you without a down payment. If you want to borrow more than the limit for your county, you will need to put down the difference yourself.

For 2024, the VA loan limit for most counties is $766,200, but this changes every year and varies by location. High-cost areas like parts of California, New York, and Washington, D.C. have higher limits — sometimes $1 million or more. You can find your county's limit on the VA's website or by asking your lender.

Here is how the limit works in practice: if your county limit is $766,200 and you want to buy a $800,000 home, the VA will may provide up to $766,200 of your loan. The lender will lend you the full $800,000, but you will need to put down $33,800 (the difference) to cover the amount above the VA may provide. This is called a VA loan with a down payment, and it is still a VA loan — you just have to contribute some of your own money.

What happens if you want to put money down anyway

You are not required to put down money on a VA loan, but you can if you want to. Some veterans choose to put down 5% or 10% to lower their monthly payment or to reduce the amount they finance. If you put down money, your loan amount is smaller, so your funding fee is smaller too.

Putting down money also gives you more negotiating power with the seller and can help you win in a competitive market. However, it defeats one of the main advantages of a VA loan — the ability to buy without saving for years. Before you decide to put down money, talk to a lender about how much it would actually save you each month. Often the savings are smaller than you expect, and you might be better off keeping your cash for emergencies or home repairs.

How to start the VA loan process

First, get your Certificate of may be able to access. You can do this before you start house hunting — it takes only a few minutes online and is free. Once you have it, contact a lender that works with VA loans. Not all lenders do, so ask specifically whether they offer VA mortgages. Many banks, credit unions, and mortgage companies do, and some specialize in VA loans.

Tell the lender your Certificate of may be able to access number and ask for a pre-qualification or pre-approval letter. This letter tells sellers that you are a serious buyer and shows how much you can borrow. The lender will pull your credit, verify your income, and ask about your debts. They will also explain the funding fee, closing costs, and your monthly payment estimate.

Once you are pre-approved, you can start looking at homes within your budget. When you find one you want to buy, your real estate agent or the seller's agent will help you make an offer. After the offer is accepted, the lender will order an appraisal and begin the formal application process. From offer to closing usually takes 30 to 45 days, depending on how quickly the appraisal comes back and how organized you are with paperwork.

Frequently Asked Questions

Do I have to use my VA loan benefit to buy a home?

No. Your VA loan benefit does not expire, and you do not lose it if you do not use it. You can use it whenever you are ready, even years from now. However, once you use it to buy a home, that benefit is tied up in that property until you sell or refinance.

Can I use a VA loan to buy a second home or investment property?

No. VA loans are for primary residences only — the home you will live in most of the time. You cannot use a VA loan to buy a vacation home, rental property, or investment property. You can only have one VA loan at a time unless you have paid off a previous VA loan or the property has been sold.

What if my credit score is low?

VA loans are more flexible with credit scores than conventional loans, but lenders still have minimum requirements — usually 580 to 620, depending on the lender. If your score is lower, some lenders will still work with you, but you may pay a higher interest rate. Ask multiple lenders what their credit requirements are before you assume you cannot may have access to.

Can the seller pay my closing costs and funding fee?

The seller can pay your closing costs, but they cannot pay your VA funding fee — that is your responsibility. However, the funding fee is usually rolled into your loan, so you do not pay it upfront. The seller can pay other closing costs like title insurance, appraisal fees, and lender fees as part of the sale negotiation.

What is the difference between a VA loan and a conventional loan?

A VA loan requires no down payment and is backed by the VA, which means the lender takes less risk and can offer better interest rates. A conventional loan usually requires 3% to 20% down and is not backed by any government agency. VA loans also have limits on closing costs and protections against predatory lending that conventional loans do not have.