How VA Loan Down Payments Work

The VA loan program lets most eligible borrowers buy a home with no down payment at all. That includes veterans, active-duty service members, and eligible surviving spouses. You can read more about who qualifies on the VA home loan program page.

No private mortgage insurance is required either. That matters a lot. On a conventional loan with less than 20% down, PMI typically adds $100 to $300 per month to your payment. With a VA loan, that cost simply doesn't exist. VA loans also tend to carry lower average interest rates than comparable conventional loans for the same borrower. The CFPB has documented this rate gap consistently across loan types.

So the benefit is real. But "no down payment required" has limits. Understanding those limits before you go under contract is the part that matters most.

One condition always applies

The VA's zero-down benefit applies when the purchase price does not exceed the appraised value of the home. This is not a technicality. If you offer $420,000 on a home and the VA appraisal comes in at $400,000, you need to cover that $20,000 gap out of pocket. The VA will not guarantee a loan above the appraised value. So the no-down-payment rule assumes the price and value are aligned.

When a Down Payment Is Required

There are two main situations where a VA loan will require a down payment. Most veterans only ever encounter one of them. But if you've used your VA benefit before and still have an active VA loan, the second one applies to you directly.

Partial entitlement

Every eligible veteran has a set amount of VA loan entitlement. When you use a VA loan to buy a home, a portion of that entitlement gets tied to that loan. If you sell the home and pay off the VA loan, your entitlement restores. But if you still have an active VA loan on a property and want to buy another home with a VA loan, you're working with partial entitlement.

In that situation, you may need a down payment to make up the difference between your remaining entitlement and the loan amount. The math depends on the county's conforming loan limit, your remaining entitlement, and the purchase price. This is exactly the kind of detail that gets missed when buyers try to navigate the process alone, and it's worth talking through your specific situation before you go too far down a path.

In most U.S. counties, VA loans allow borrowing up to the current FHFA conforming loan limit with no down payment when full entitlement is available. Limits update annually. Check the current year's figure at the FHFA conforming loan limits page before you run your numbers.

When the purchase price exceeds appraised value

As mentioned above, the VA will not guarantee the portion of a loan that exceeds the home's appraised value. If the seller won't reduce the price, you pay the difference. This can happen in competitive markets where buyers overbid. It's not common, but it's real. Colorado's Front Range and Florida's coastal markets both see this during high-demand stretches.

The VA Funding Fee

VA loans don't require a down payment, but they do require a funding fee in most cases. This fee helps keep the VA loan program running without taxpayer cost. It's not small. At zero down on a first use, the fee is 2.15% of the loan amount. On a $400,000 loan, that's $8,600.

The good news is that you can roll the funding fee into your loan rather than paying it upfront. But rolling it in means you pay interest on it for the life of the loan. So it costs more in the long run. Understanding this is key before you decide how much to put down, because the funding fee rate drops meaningfully when you bring in even a modest down payment.

Funding fee rates by down payment

Veterans who receive VA disability compensation are fully exempt from the funding fee. Per VA guidelines, surviving spouses who receive Dependency and Indemnity Compensation are also exempt. If you think you may qualify for an exemption, confirm it before closing. We see this one get missed more than it should.

"The funding fee exemption for disabled veterans is one of the most commonly missed details we see. A veteran comes in assuming they owe the fee, we check the Certificate of Eligibility, and it turns out they're exempt. That's a $5,000 to $9,000 difference on a typical loan. Always confirm exemption status before you close."

Reed Letson, Owner, Elevation Mortgage

When Putting Money Down Makes Sense

This is the question most articles skip. They explain that you don't have to put money down, but they don't help you think through whether you should. The answer depends on one calculation: does the funding fee savings outweigh the cost of using that cash?

Take a $400,000 purchase. At zero down with a first-time use, your funding fee is 2.15%, which comes to $8,600. If you put 5% down ($20,000), the fee drops to 1.50% on the remaining $380,000, which is $5,700. You save roughly $2,900 in funding fee by putting down $20,000. That's not a strong return on $20,000 of cash, especially if you need reserves after closing.

The case for keeping your cash

For most buyers, holding onto cash after closing makes more sense than chasing a funding fee reduction. Homeownership comes with immediate costs: repairs, furniture, HOA dues, emergencies. Running thin on reserves after closing is a common source of financial stress in the first year. Because the funding fee can be financed, and because VA interest rates tend to be competitive, the monthly cost difference from rolling in the fee is often modest.

But there are cases where a down payment helps. If you're a subsequent user paying 3.30% on a larger loan, the math shifts. On a $600,000 loan at 3.30%, the fee is $19,800. A 5% down payment drops that to 1.50% on $570,000, saving over $10,500 in fees. That's a meaningful difference.

Down Payment Assistance and VA Loans

One thing most articles don't cover: down payment assistance programs can be combined with a VA loan. This matters when a down payment is required due to partial entitlement, or when a veteran simply wants to bring cash to the table without draining savings.

In Colorado, the Colorado Housing and Finance Authority offers down payment assistance programs that can work alongside a VA loan in certain scenarios. For Colorado buyers, these programs are worth exploring before assuming you need to fund a down payment entirely from personal savings.

In Florida, the Hometown Heroes program specifically serves first responders, educators, and military members, including active-duty service members and veterans. It offers down payment and closing cost assistance. Florida buyers using a VA loan who also have a Hometown Heroes benefit can potentially stack both, though the combination needs to be structured correctly at the loan level.

Not every lender knows how to structure these combinations. Elevation Mortgage works as an independent broker across multiple lenders, which means we can find options that a single-lender shop might not offer. If you want to explore all available loan programs, our mortgage loan programs page is a good starting point.

Common Mistakes Veterans Make

Three patterns we see regularly

Assuming $0 down always applies. Veterans with an active VA loan who want to buy a second home often go under contract before checking their entitlement status. The partial entitlement math catches them off guard, and the deal falls apart or gets delayed. Always check your Certificate of Eligibility first.

Not checking for a funding fee exemption. Disabled veterans and certain surviving spouses are fully exempt from the funding fee. We see borrowers pay thousands of dollars they didn't owe because no one confirmed their exemption status before closing. This should be one of the first questions answered on any VA loan application.

Rolling in the funding fee without running the numbers. Financing the fee is fine in many situations. But on a subsequent use loan with a 3.30% fee, rolling it into a large loan at current interest rates means paying that money back with interest for 30 years. Sometimes paying it upfront, or putting 5% down to reduce it, is the smarter move. It depends on your cash position and how long you plan to stay in the home.