VA loans do not require a down payment, but you still need to understand what you're paying for

A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs. The defining feature is that the VA guarantees a portion of the loan to the lender, which means you can borrow the full purchase price without putting money down. You do not need to save a down payment before you can close on a home.

This is different from conventional mortgages, which typically require 5 to 20 percent down, or FHA loans, which require 3.5 percent. With a VA loan, the lender takes on less risk because the VA is backing the loan, so they do not need you to contribute cash upfront.

However, "no down payment" does not mean "no money out of pocket." You will still owe closing costs, a VA funding fee, property taxes, homeowners insurance, and possibly HOA fees. Understanding what you actually pay is the difference between thinking you can afford a home and discovering you cannot close.

Key Takeaways

  • VA loans allow you to borrow 100 percent of the home's purchase price with no down payment required.
  • You must pay a VA funding fee (typically 2.3 percent of the loan amount for first-time users) unless you are exempt due to disability or other circumstances.
  • Closing costs, property taxes, homeowners insurance, and HOA fees are separate from the down payment and are your responsibility.
  • You must have a Certificate of may be able to access from the VA and meet your lender's credit and income requirements to use a VA loan.
  • Some lenders will roll closing costs into the loan, but this increases the total amount you borrow and the interest you pay over time.

The VA funding fee and what it covers

The VA funding fee is a one-time charge that compensates the VA for the risk of guaranteeing your loan. It is not an interest rate or a monthly payment—it is a flat fee calculated as a percentage of the loan amount and paid at closing.

For most first-time VA loan users, the funding fee is 2.3 percent of the loan amount. If you are buying a second or subsequent home with a VA loan, the fee is 3.6 percent. If you put down 5 percent or more (which you can choose to do), the fee drops to 1.25 percent. The fee can be rolled into your loan balance, meaning you do not pay it in cash at closing—you pay it back over the life of the mortgage with interest.

You are exempt from the funding fee if you receive 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 documentation from the VA to your lender.

What you do pay at closing without a down payment

Closing costs on a VA loan typically range from 2 to 5 percent of the purchase price, depending on your location and lender. These include appraisal fees, title search and insurance, recording fees, and lender fees. Unlike the funding fee, these costs are not optional and cannot always be rolled into the loan.

The VA sets a limit on how much of the closing costs the seller can pay on your behalf. Currently, sellers can cover up to 4 percent of the purchase price in closing costs. If your closing costs exceed that amount, you pay the difference. Some lenders will roll the excess into the loan; others require you to bring cash to closing.

You are also responsible for a property appraisal (usually $400 to $600), which the lender orders to confirm the home is worth what you are paying. If the appraisal comes in low, you cannot borrow more than the appraised value, and you will need to either renegotiate the price or walk away.

Homeowners insurance and property taxes you must budget for

Homeowners insurance is required by every lender and is not part of the down payment or closing costs—it is an ongoing expense. The cost varies by location, home value, and the coverage you choose, but typically ranges from $800 to $2,000 per year. You pay the first year's premium at closing.

Property taxes are also your responsibility and are calculated by your county or municipality based on the home's assessed value. These are paid annually or in installments, depending on your location. Some lenders will set up an escrow account where you pay property taxes and insurance as part of your monthly mortgage payment, but you are still the one funding it.

When you are calculating whether you can afford a home, add these costs to your monthly mortgage payment. A lender will factor them in when determining how much you can borrow, but you need to understand them yourself so you do not overextend.

How to get a Certificate of may be able to access for a VA loan

Before any lender will approve you for a VA loan, you must have a Certificate of may be able to access (COE) from the VA. This document proves you served in the military and meet the service requirements for the benefit. You do not need to apply for the benefit itself—the certificate is just proof that you are may be able to access to use it.

You can request a COE through the VA's website (va.gov), by mail, or through your lender. Most lenders can request it on your behalf as part of the loan process. The VA will mail it to you or send it electronically, usually within a few days. If you are a surviving spouse, you will need to provide a copy of the veteran's death certificate and proof of your marriage.

You do not need the certificate in hand before you start shopping for homes, but you will need it before the lender can formally approve your loan. Having it ready speeds up the process.

Credit score and income requirements still apply

The VA does not set a minimum credit score, but most lenders require a score of 620 or higher. Some lenders will work with scores as low as 580, but you may pay a higher interest rate. Your credit history matters because it shows whether you have paid past debts on time.

You must also have sufficient income to cover the mortgage payment plus property taxes, insurance, HOA fees, and any other debts you owe. Lenders use a debt-to-income ratio to determine how much you can borrow—typically, your total monthly debt payments (including the new mortgage) should not exceed 41 to 50 percent of your gross monthly income. This varies by lender.

If you have recent late payments, collections, or a bankruptcy, you may still be able to get a VA loan, but you will need to explain what happened and show that your finances have stabilized. The lender will decide whether to approve you based on the full picture of your financial history.

When a lender requires cash at closing despite no down payment

Even though VA loans do not require a down payment, you may still need to bring cash to closing in certain situations. If closing costs exceed what the seller will pay and your lender will not roll them into the loan, you pay the difference. If the appraisal comes in low and you want to proceed, you may need to cover the gap between the appraised value and the purchase price.

Some lenders have stricter policies than others about rolling costs into the loan. If one lender requires cash and another does not, it is worth shopping around. The difference can be thousands of dollars.

Before you make an offer on a home, ask your lender in writing what closing costs you will be responsible for and whether they can be rolled into the loan. Get a Loan Estimate within three business days of applying—this document shows all the costs you will owe at closing.

Frequently Asked Questions

Can I use a VA loan to buy a second home?

Yes, but the funding fee is higher (3.6 percent instead of 2.3 percent) and you must have enough remaining entitlement. Your entitlement is the amount the VA will may provide, and it can be used more than once, but not all at once. A lender can tell you how much entitlement you have left after your first loan.

What happens if the home appraisal is lower than the purchase price?

You cannot borrow more than the appraised value. You can renegotiate the price with the seller, pay the difference in cash, or walk away. The appraisal protects both you and the lender from overpaying for a home.

Do I have to use a VA loan, or can I use a conventional mortgage instead?

You can choose either. A conventional mortgage may have a lower interest rate in some cases, but you would need a down payment. A VA loan has no down payment requirement and typically offers competitive rates, so most veterans find it the better option.

Can the seller pay all my closing costs so I truly pay nothing?

The seller can pay up to 4 percent of the purchase price in closing costs. If your closing costs are less than that, yes, you could pay nothing at closing. But the VA funding fee (if you owe it) is separate and typically cannot be paid by the seller—you either pay it in cash or roll it into the loan.

What if I do not have a Certificate of may be able to access yet?

You can request one at any time through va.gov or ask your lender to request it for you. It usually arrives within a few days. You do not need to wait for it before you start house hunting, but you will need it before the lender can formally approve your loan.