VA Loan Down Payment: Do You Really Need $0 Down?
Zero down is allowed, but a bigger down payment can lower your funding fee and your payment.
One of the biggest advantages of a VA loan is that eligible borrowers can buy without a down payment. The VA describes its program as one that does not require down payments or monthly mortgage insurance. That does not mean $0 down is always the best choice.
How the down payment changes your funding fee
On a purchase loan, the VA funding fee rate depends on your down payment and on whether it is your first use of the benefit. For first use it is 2.15% with less than 5% down, 1.50% with 5% or more, and 1.25% with 10% or more. After first use, the rate is 3.30% under 5% down, and the same 1.50% and 1.25% above that.
Example: a $350,000 home
Here is what different down payments do on a $350,000 home at a 6.25% interest rate over 30 years, for a first-time VA borrower who finances the funding fee. This is an illustration, and your lender's numbers will differ.
| Down payment | Funding fee (rate) | Loan with fee | Monthly P&I |
|---|---|---|---|
| 0% down ($0) | $7,525.00 (2.15%) | $357,525 | $2,201 |
| 5% down ($17,500) | $4,987.50 (1.50%) | $337,488 | $2,078 |
| 10% down ($35,000) | $3,937.50 (1.25%) | $318,938 | $1,964 |
Putting 10% down instead of nothing cuts the funding fee by nearly half and lowers the monthly payment, but it costs $35,000 in cash. Whether that trade makes sense depends on what else you would use the money for.
When a lender can still ask for a down payment
The VA says your lender may require a down payment if you do not have enough remaining bonus entitlement for a 25% guaranty on the loan amount you want. This mostly affects borrowers with reduced entitlement. Read our guide to VA loan limits and entitlement for the details.
The 5% threshold is where the math changes most
The funding fee drops the moment your down payment reaches 5%. On the $350,000 example, putting 5% down ($17,500) cuts the funding fee by $2,537. In other words, part of the cash you put down comes straight back as a lower fee. Above 5%, the next drop only comes at 10%.
| Down payment | Cash at closing | Funding fee | Total interest over 30 years |
|---|---|---|---|
| 0% down | $0 | $7,525 | $434,958 |
| 5% down | $17,500 | $4,988 | $410,581 |
| 10% down | $35,000 | $3,938 | $388,014 |
Total interest assumes you keep the loan for the full 30 years at 6.25%, which most people do not. If you expect to sell or refinance within a few years, the upfront difference matters more than the lifetime interest.
Questions to ask yourself before putting money down
- After closing, will I still have three to six months of expenses saved?
- Do I have high-interest debt that the same cash would pay off faster?
- Am I exempt from the funding fee? If so, the 5% and 10% thresholds do not save anything. See who is exempt.
- Will the house need repairs or furniture in the first year?
A simple way to decide
- Estimate the payment at $0 down with the VA loan payment calculator.
- Change the down payment to 5% and 10% and compare the payment and the funding fee.
- Keep an emergency fund. A lower payment is not worth an empty savings account.
Frequently asked questions
Is a down payment required for a VA loan?
The VA describes its home loan program as one that does not require down payments, though a lender can require one if you do not have enough remaining entitlement.
Does a bigger down payment lower the VA funding fee?
Yes. For a purchase, the rate falls to 1.50% with 5% or more down, and to 1.25% with 10% or more down.
Can I pay the funding fee instead of making a down payment?
They are separate. The funding fee is a one-time charge on the loan amount, and a down payment reduces the loan amount that the fee is calculated on.
Are there other ways to save cash at closing?
Yes. You can negotiate seller credits, compare lenders, and finance the funding fee. See our guide to VA loan closing costs.
Is zero down a bad idea?
Not necessarily. It keeps your cash available. The tradeoff is a higher funding fee and a larger monthly payment, so compare both options.
Sources
- VA.gov: funding fee and closing costs
- VA.gov: entitlement and limits
- VA.gov: home loan program overview (IRRRL page)
This page is educational and is not legal, tax or financial advice. Rules and rates can change, so confirm the details with the VA and your lender.