VA loan down payment requirements

A VA loan is a type of mortgage that is backed by the U.S. Department of Veterans Affairs and designed to help servicemembers, veterans, and surviving spouses afford a home. If you qualify, it’s a powerful financial tool that can help you get a mortgage and save thousands over the life of the loan.

Of course, one of the biggest barriers to homeownership is often saving enough for a down payment. A VA loan can help with that too. In most cases, a VA loan down payment is not required. Though it’s not required for this kind of loan, there are many reasons why you may still want to make a down payment when using a VA home loan.

Let’s explore your options for a VA loan and whether or not you should save for a down payment.

Do VA loans require a down payment?

A VA loan does not require a down payment as long as the home’s sales price is not higher than its appraised value. This is one of the program's biggest advantages and part of why people who qualify apply for a VA loan. But there are situations in which making a down payment could be wise.

For instance, the more money you put down on a home, the less money you have to borrow. This can make qualifying easier, resulting in a lower monthly payment or interest rate, and save thousands over the life of your loan. Typical down payments for different types of loans, such as a conventional mortgage, often range between 3%¹ and 20% of the purchase price.

VA funding fee explained

While VA loans offer lower closing costs and more flexible qualifying criteria, and they don’t charge private mortgage insurance (PMI), there are costs to obtaining this kind of mortgage. One is the VA loan funding fee. This is a one-time fee, paid to the VA, that helps offset the cost of the loan program to taxpayers and keep it viable for more servicemembers and veterans.

The funding fee is dependent on many factors, including the size of your down payment. For instance, assuming this is the first time you use a VA loan, here are the VA loan funding fee rates:

So, if you bought a $300,000 home and put 5% ($15,000) down and borrowed $285,000, your funding fee would be $4,275 (1.50% of $285,000). To learn more about how much cash you may need to buy a home, you can use the Rocket Mortgage down payment calculator.

Should I offer a down payment on my VA loan?

This is an important question since whether you make a VA loan down payment affects more than you might imagine. Here are some main things to consider.

Lowers the VA funding fee

As we just saw, the larger down payment you make, the lower your mandatory funding fee will be. And although the percentages might look small, they can add up with a substantial loan. For instance, the funding fee cost difference between a 3% down payment and a 5% down payment on a $400,000 VA loan is $2,600.

Cuts the cost of monthly payments

The more money you put down, the less money you need to borrow. That results in lower monthly payments, and that results in more money for savings and investments, home projects, or vacations.

Builds equity faster

Home equity is the difference between what your home is worth and the outstanding balance on your mortgage. With zero down payment, you start with no equity. Making a down payment gives you immediate home equity and could give you more options later when selling or refinancing.

Reduces principal balance and loan costs

Because a down payment lowers the amount you have to borrow, it creates a lower principal balance. This is a real power move since it lowers your closing costs and the amount of interest you pay over the life of the loan.

Increases approval chance

While it’s true that VA loans are more flexible than other loan types when it comes to qualifying, a down payment can increase your chances of being approved for a loan. A down payment lowers your debt-to-income ratio (DTI) and signals that you are financially stable and able to manage your personal finances. This translates into lenders seeing you as less risky and more creditworthy, which increases the likelihood that you will be approved for a loan.

The bottom line: Down payments aren’t required, but they can help

If you qualify for a VA loan, it can be a powerful tool to save you a substantial amount of money when you buy a home. It can also make qualifying easier. It’s one of our nation’s ways of thanking service members, veterans, and their surviving spouses.

Though a VA loan doesn’t require you to make a down payment, it could be a smart financial move. A down payment can further increase your chances to qualify, lower your monthly payment, lower your closing costs, give you immediate equity, and lower the total cost of your loan.

If you’re ready to take the next step toward owning a home, you can apply for a VA loan or other types of loans² by reaching out to Rocket Mortgage³.

¹ The 3% down payment option is only available on certain conventional loan products and is not available in all states. Additional terms and conditions may apply.

² Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

³ Rocket Mortgage is a trademark of Rocket Mortgage, LLC or its affiliates.