What Percentage Should My VA Loan Down Payment Be?

What is my down payment on the VA loan?

Good answer: it can be zero if you choose.

However, what a lot of folks don’t know is you can actually put money down on a VA loan as well, and we’re going to explain both scenarios here in this video today. My name’s Evan Kaufman, your VA loan originator, here to help you win a home with a VA loan.

Now, down payment in VA loans, very interesting. It’s the only loan type that allows you to put 0% down, not have private mortgage insurance, and the ability to do what’s called a streamline interest rate reduction, or finance loan in the future, which is just an incredible loan product.

So, the VA loan is just really good because it has those aspects about it. The 0% down means that you can, if you so choose, put 0% down on the home, meaning no down payment.

Now, one of the little asterisks we got to put on there is that you still have closing costs.

So sometimes folks will ask us, “Well, I want to put no money into the home and I want to make sure that there’s zero dollars because he said he can do 0% down payment.”

Yes, we as a lender can do a 0% down payment, however, there’s still other closing costs associated with buying the home that you still have to take care of.

That’s taxes, title insurance, sometimes some lender fees too that you got to also wrap into the closing cost that you have to take care of.

Now, sometimes folks are like, “Well, Evan, I’ve heard my friend, they got into the home with no money.”

Yes, that still is possible.

Just know it’s almost like a little different deal where the VA loan won’t pay for your closing costs, but the seller can.

So, in a lot of scenarios, we’ll see folks ultimately say, put 0% down, and they might offer the seller a little bit more money, and they’ll ask the seller for some closing costs – meaning that they truly can get into the home with $0, that’s possible.

However, let’s turn to the alternative.

You can put money down on a VA loan.

This is something that, myself, having been in the military – while I was in and helping folks buy real estate using their VA loans – I honestly at times assumed that you just had to go 0% down on a VA loan.

But you can put money down on a VA loan, and in fact, you’re incentivized to do so.

So, if you put 5% down on a VA loan, the VA says to us as a lender, “Hey, we will lower that veteran’s VA funding fee.”

What is a VA funding fee?

It’s a mandated payment that everyone has to pay if they’re utilizing the VA loan. It can be waived if you have service-connected VA disability, which a lot of veterans who are out have – which is absolutely wonderful that we can use that to apply and get it waived. But if you’re active duty, you’re going to have that VA funding fee regardless of the lender you’re dealing with.

Now, if it’s your first use of the VA loan, that funding fee is a little bit lower.

If it’s your subsequent use, meaning any use after your first, it’s quite a bit higher.

If you’re doing 0% down, it’s 3.3% of the loan value, pretty big amount. You can finance that into the loan, which is what most folks do, but it’s quite a bit.

If you put just 5% down, though, the VA will lower that funding fee to 1.5%, pretty big savings. Put 5% down, save 1.8%, that’s incredible. It’s a 36% return one time on your money, one of the best deals you can do with a VA loan and getting a return.

If you put 10% down, you cut that funding fee down to 1.25%.

So, the whole deal is that there’s actually some benefits to putting money down on a VA loan, the caveat being, of course, if you have that VA disability compensation, that funding fee gets waived anyways. So, if you put 0% down versus 5% or 10% down on a VA loan, doesn’t matter, you don’t have the funding fee, period.

But if you’re active duty, for example, or you don’t have that VA disability compensation, putting money down can actually lower that closing cost for you, which can be a big benefit.

So hopefully, this helps clarify a little bit about how much do you have to put down on a VA loan. The answer is you can go zero if you choose, which is a really powerful part of the VA loan.

You can do 0% down and pay no private mortgage insurance, which if you were conventional or FHA and you decided to put a low amount of money down, say 3.5% to 5%, something like that, you would have to pay private mortgage insurance or mortgage insurance premium on an FHA loan, and that’s a monthly, essentially, penalty cost for you putting less than 20% down.

And for FHA, that’s just taking FHA loan period, you’re going to have it no matter what. There, but it’s an extra monthly cost.

VA loans, you don’t have it, which is really good. But you can put money down on the VA loan if you so choose, which is one of the things that I want to always make sure folks are aware of. And there’s actually some benefits to doing it, especially if you do not have that VA disability compensation.

So, keep that in mind as you’re working through that VA loan process, and again, we’re always happy to help you out with this.

We’ve got a lot of good videos and playlists to walk you through the whole process of utilizing the VA loan, and I’m here for you at any step if you have any questions.

My name is Evan Kaufman, your VA loan originator. Hopefully, this helps you go out there and win a home with the VA loan. Take care.