What Down Payment Do I Need For A VA Loan?

The VA Loan is backed by the Department of Veterans Affairs and available for military service members, Veterans, Reservists, National Guard members, and spouses under some circumstances. It originated as part of the Post-World War II GI Bill along with tuition for higher education and other benefits. Now, other benefits have moved to the Post-9/11 GI Bill and the VA Loan remains a separate benefit offered by the Department of Veterans Affairs.

One of the main benefits of the VA Loan is that it does not require a down payment. This means that you can purchase a home without any money out of pocket. Other low down payment mortgage options, such as an FHA Loan, only go down to 3.5%. Even then, you will need to pay Private Mortgage Insurance (PMI) until your equity reaches a certain threshold, usually 20%. 

But won’t I need to pay closing costs? Not necessarily. In most cases, closing costs can be rolled into your mortgage. If the seller covers part or all the closing costs, this may not even be a factor. 

If you are using your VA Loan entitlement for the second time without selling or refinancing your first VA Loan home, you may need to put a down payment down. Typically, you can’t have more than one VA Loan at a time. This is due to the stipulation that you need to purchase the home with the intention of living there as your primary residence. The exception is when you purchase one home with your VA Loan but do not use all of your entitlement amounts.

In the future, if you want to move and rent your first home (still financed with a VA Loan), you will only have part of your entitlement left. You will need to cover the remainder with a conventional or another type of loan, which does require a down payment. Your lender will be able to explain the specifics of your situation and which option works best.