Down Payment for a VA Loan | 2022 Requirements
For qualifying veterans and active-duty service members, the VA loan can be a great deal.
One of the most significant benefits of a VA loan is the zero down payment requirement. Still, some VA borrowers choose to make down payments.
Letâs explore the requirements and practicalities of making a down payment for a VA loan.
See if youâre eligible for a VA home loan. Start here (Jul 11th, 2022)
What is a VA loan?
VA loans are backed by the U.S. Department of Veterans Affairs. Home buyers with qualifying military experience can access the many benefits of a VA loan, including no down payment requirement, lower interest rates and no private mortgage insurance. Existing homeowners with VA eligibility can also use the VA loan program to refinance and cash out home equity.
Is a down payment required for a VA loan?
VA loans generally donât require a down payment. As long as you meet the VAâs military service requirements then you usually wonât have to make a down payment on the loan.
There are a couple exceptions, however. You may be required to make a down payment on a VA loan if you have an existing VA mortgage thatâs not paid off or if youâre borrowing above conforming loan limits. In addition, someone buying with a non-VA-eligible partner may need to make a partial down payment. Your lender can help you understand the VA loan down payment requirements in these special circumstances.
Why make a down payment on a VA loan
Although a down payment isnât required, some choose to make one anyway. Here are a couple of reasons some VA borrowers choose to make a down payment:
An upfront down payment can be a challenge for any budget. But if a down payment is within your reach, it could give your future budget more flexibility.
Why VA loans donât require a down payment
VA loans donât require a down payment because the Department of Veterans Affairs insures a portion of every VA loan issued by private lenders. This level of insurance means that if the borrower defaults on the loan, the federal government will pay back an agreed-upon portion of the loss.
With this guarantee in place, lenders can confidently lend to approved borrowers without a down payment requirement.
Pros and cons of making a down payment on a VA loan
Every financial decision comes with advantages and disadvantages. Here are some of the points to consider when deciding whether to make a down payment for a VA loan.
Pros of a down payment for a VA loan
The pros of making a down payment for a VA loan include:
Cons of a down payment for a VA loan
The cons of making a down payment for a VA loan include:
When do VA loans require a down payment?
Although itâs not the norm, the VA loan requires a down payment in some cases. Hereâs when to expect this cost:
No down payment is one of the most significant VA loan benefits and itâs rare that youâll need to make one â unless you want to.
Down payment for a VA loan FAQ
Do you need a down payment for a VA loan?
The VA home loan program doesnât require a down payment for most loans. However, youâll need to be a current or former military service member who has met the service requirements to tap into this no down payment loan.
What is the down payment for a VA loan?
There is no down payment requirement for a VA loan. Most VA borrowers can close on their new home purchase without making a down payment. However, keep in mind youâll still have to cover upfront closing costs out of pocket unless the seller agrees to pay them for you.
Can I put 20% down on a VA loan?
Although there is no down payment requirement for a VA loan, you can make one if you choose to. Depending on your financial situation, you might decide to put 20% down on a VA loan.
But a VA loan is just one of many loan options. If you are able to put 20% down on your home purchase, conventional loans are another option to consider. The 20% down payment will eliminate any PMI obligations. Plus, you can avoid the VA funding fee.
Am I eligible for a VA-backed purchase loan?
If you are an active-duty service member or veteran, then youâll need to meet specific service requirements to qualify for a VA-backed purchase loan.
Eligible VA homebuyers must have served 181 days of active duty during peacetime, 90 days of active duty during wartime, or six years in the Reserves or National Guard. Surviving spouses may also qualify for a VA loan if their military spouse was killed in the line of duty and they havenât remarried since.
If you think you are eligible for a VA loan, youâll need to obtain a Certificate of Eligibility (COE) from the Department of Veterans Affairs. With this documentation, you can pursue a VA mortgage loan through a lender.
Why might I want a VA-backed purchase loan?
A few reasons to pursue a VA home loan include the lack of down payment requirements, no private mortgage insurance (PMI) premiums, relatively lax credit score requirements, reasonable closing costs, and attractive mortgage rates.
Additionally, VA homeowners can pursue a cash-out refinance option in the future. As a first-time homebuyer, this ease of access to your home equity is another great feature.
Each of these reasons makes the VA purchase loan an attractive opportunity for eligible home buyers. But keep in mind that a VA loan is only available for eligible veterans seeking a primary residence.
See if youâre eligible for a VA home loan. Start here (Jul 11th, 2022)