Not always. Eligible VA buyers may be able to purchase a home with no down payment. But $0 down does not necessarily mean $0 due at closing, so it is important to understand how a VA loan down payment differs from other homebuying costs.
Quick answer: The U.S. Department of Veterans Affairs states that a VA backed purchase loan may offer no down payment when the home's sales price is not higher than its appraised value. VA backed purchase loans also do not require private mortgage insurance or mortgage insurance premiums.
How Does a $0 Down VA Loan Work?
VA home loans are provided by private lenders, while the Department of Veterans Affairs guarantees a portion of an eligible loan. That guaranty can allow qualified borrowers to access home financing without making the type of down payment that may be required with other mortgage programs.
According to the Department of Veterans Affairs, nearly 90% of VA backed home loans are made with no down payment. That can allow eligible buyers to preserve money they might otherwise need to put toward the purchase price of a home.
Do VA Loans Have PMI?
No. VA backed purchase loans do not require private mortgage insurance, commonly called PMI, or mortgage insurance premiums.
That is an important distinction for buyers comparing financing options. With some conventional loans, a buyer who makes a smaller down payment may be required to pay private mortgage insurance. VA financing does not include that requirement.
Does $0 Down Mean $0 Out of Pocket?
No. A VA loan with no down payment does not automatically mean a buyer will have no costs before or at closing.
Depending on the transaction, a VA buyer may still have costs that include:
- Allowable loan closing costs
- Prepaid property taxes and homeowners insurance
- The VA funding fee, when applicable
- Other costs associated with the specific purchase or lender
The amount a buyer needs will depend on the loan, property, lender, purchase agreement, and the buyer's individual circumstances.
$0 down and $0 at closing are not the same thing
A down payment is the portion of the home's purchase price a buyer pays upfront. Closing costs and prepaid expenses are separate. A qualified VA buyer may be eligible for zero down financing while still having other costs related to the purchase.
What Is the VA Funding Fee?
The VA funding fee is a one time fee that applies to many VA backed and VA direct home loans. The fee helps support the VA home loan program.
The amount can vary based on factors such as the type of loan, whether the borrower has used the VA home loan benefit before, and the amount of the down payment.
Some borrowers are exempt from paying the VA funding fee. Buyers should verify their current funding fee status and amount with their lender and the Department of Veterans Affairs.
Can the VA Funding Fee Be Financed?
For a VA backed purchase loan, VA allows the funding fee to be financed into the loan rather than requiring it to be paid entirely at closing.
Other closing costs generally cannot simply be added to the purchase loan in the same way. VA rules do allow sellers to pay certain closing costs and provide certain concessions, subject to applicable limits and requirements.
Can You Make a Down Payment on a VA Loan?
Yes. No down payment is a potential VA loan benefit, not a requirement that buyers must finance the entire eligible purchase price.
A borrower may choose to make a down payment. VA's funding fee schedule also includes different funding fee percentages at certain down payment levels, depending on the borrower's circumstances.
A lender can help a buyer compare how different down payment amounts may affect the loan and estimated cash needed at closing.
Can You Buy a New Construction Home With $0 Down?
Potentially. Eligible borrowers may be able to use VA financing with no down payment to purchase qualifying new construction when the borrower, lender, property, appraisal, purchase price, and loan meet applicable requirements.
Allen Edwin Homes accepts VA financing on eligible new home purchases throughout Michigan, Indiana, and Ohio.
Does Allen Edwin Homes Accept VA Financing?
Yes. Allen Edwin Homes accepts VA financing on eligible new home purchases.
Since Allen Edwin Homes began tracking VA financed transactions in 2017, 667 homes have closed using VA financing.
For a VA buyer comparing new construction with resale, this can provide useful clarity. An individual resale seller decides whether to accept, counter, or decline an offer. Allen Edwin Homes accepts VA financing on eligible purchases, so VA buyers know that financing option is welcome when exploring an eligible Allen Edwin home.
VA Down Payment FAQs
Frequently Asked Questions About VA Loan Down Payments
Do VA loans require a down payment?
Not always. Eligible borrowers may qualify for a VA backed purchase loan with no down payment when the home's sales price is not higher than its appraised value. Lender and VA requirements still apply.
Are VA loans really zero down?
They can be. The Department of Veterans Affairs states that nearly 90% of VA backed home loans are made with no down payment. A buyer may still have closing costs, prepaid expenses, or a funding fee when applicable.
Do VA loans require PMI?
No. VA backed purchase loans do not require private mortgage insurance or mortgage insurance premiums.
Are there closing costs with a VA loan?
Yes. VA buyers can still have allowable closing costs, prepaid expenses, and other transaction costs. The exact amount depends on the loan, lender, property, and purchase agreement.
Can I put money down even if my VA loan does not require it?
Yes. A borrower can choose to make a down payment even when zero down financing is available. Buyers should compare their options with their lender before deciding how much to put down.
Can I use a zero down VA loan to buy a new home?
Potentially. VA financing may be used for eligible new construction purchases, including qualifying Allen Edwin Homes, when the borrower, property, appraisal, lender, and loan meet applicable requirements.
Does Allen Edwin Homes accept VA financing?
Yes. Allen Edwin Homes accepts VA financing on eligible new home purchases in Michigan, Indiana, and Ohio.
Explore New Homes With VA Financing
Allen Edwin Homes accepts VA financing on eligible new home purchases in Michigan, Indiana, and Ohio. Explore available homes or learn more about VA financing and Hometown Heroes.
