Programme
VA Loan
No down payment and no monthly mortgage insurance, paid for once instead of every month.
A VA loan is guaranteed in part by the Department of Veterans Affairs, which is what lets a lender write it with no down payment and — uniquely among the low-down-payment routes — no monthly mortgage insurance at any loan-to-value. What replaces that monthly cost is a single funding fee set by statute, scaled to your down payment and to whether this is your first use of the benefit, and waived entirely for several categories of borrower. The arithmetic below is about where that fee lands and what a zero-down start actually means for your position in the house.
- No down payment with full entitlement
- No monthly mortgage insurance at any LTV
- A one-time funding fee, with statutory exemptions
- The fee is 0.50% on an IRRRL
Floor four
What it gives you
There is no monthly mortgage insurance, at any loan-to-value
This is the structural difference. FHA charges an annual premium that usually never ends; a conventional loan charges PMI until you reach 80%. A VA loan charges neither, at 100% loan-to-value or anywhere else. Over thirty years that absence is worth more than most rate differences.
The down payment can be nothing
A borrower with full entitlement can finance the whole purchase price up to the appraised value. Putting money down is still allowed and it reduces the funding fee — 1.50% at 5% down and 1.25% at 10% — so the choice is a real one rather than a formality.
The appraisal comes with a way out
If the VA Notice of Value comes in below the agreed price, the VA amendatory escape clause lets you withdraw from the contract and recover your deposit rather than being forced to make up the difference in cash. That is a protection the conventional route does not give you.
Refinancing into a lower rate is deliberately cheap
The Interest Rate Reduction Refinance Loan carries a funding fee of 0.50% and a much lighter documentation burden than a full refinance, because its only purpose is to lower the rate on a loan the VA already guarantees.
Floor three
What this programme costs you
Every programme buys you something by charging you something else. This is the half a brochure leaves out, and it is the half that decides whether the programme is right for you.
- Trade-off 01
The funding fee is real money, and financing it puts you underwater on day one
2.15% on a first-use, zero-down purchase is $6,450 on a $300,000 house. Almost everyone rolls it into the loan, which means you owe $306,450 on a house worth $300,000 before you have made a payment — and you pay interest on that fee for thirty years. If prices move sideways for two years and you need to sell, the selling costs come out of equity you do not have yet. The fee is not a rate, but treating it as free is the mistake.
- Trade-off 02
The property has to satisfy VA, and some sellers avoid that
A VA-assigned appraiser checks the home against VA's Minimum Property Requirements as well as valuing it. Issues get called out and must be cured before closing. In a market with competing offers, some sellers take a different contract rather than deal with it — which is a cost of the benefit that lands on you as a buyer, not as a borrower.
- Trade-off 03
Entitlement is not infinite if you already have a VA loan
Keeping an existing VA loan ties up part of your entitlement. What is left determines how much you can borrow on a second VA loan with no down payment, and the calculation is tied to the county loan limit. A second simultaneous use frequently needs a down payment, which surprises people who were told there is no loan limit.
- Trade-off 04
A subsequent use costs more, and it costs the most where the fee already hurts
The first-use fee on a zero-down purchase is 2.15%. A subsequent use of the benefit at the same zero down payment is 3.30% — over $9,900 on a $300,000 loan. Putting 5% down drops it to 1.50% whether it is your first use or your fifth, which makes a modest down payment worth far more on a second VA loan than on a first.
Floor two
The published rules, and where they come from
These are rules, not prices. This site publishes no rates, so what follows is the part of the programme that is written down somewhere a third party can check.
| Rule | What it says | Source |
|---|---|---|
| Down payment | None required for a borrower with full entitlement, up to the appraised value. | 38 U.S.C. 3703; VA Lenders Handbook M26-7 |
| Monthly mortgage insurance | None, at any loan-to-value. The funding fee is the whole of the borrower's insurance cost. | 38 U.S.C. 3703; VA Lenders Handbook M26-7 |
| Funding fee — first use, purchase | 2.15% of the loan with less than 5% down; 1.50% with 5% up to but not including 10%; 1.25% with 10% or more. | 38 U.S.C. 3729 |
| Funding fee — subsequent use, purchase | 3.30% with less than 5% down. The 1.50% and 1.25% tiers are unchanged at 5% and at 10% or more down. | 38 U.S.C. 3729 |
| Funding fee — refinance | 0.50% on an Interest Rate Reduction Refinance Loan. On a cash-out refinance, 2.15% on a first use and 3.30% on a subsequent use. | 38 U.S.C. 3729 |
| Funding fee exemptions | No fee is charged to a borrower receiving VA compensation for a service-connected disability, to a Purple Heart recipient serving on active duty, or to an eligible surviving spouse. | 38 U.S.C. 3729(c) |
| Occupancy | The borrower must certify an intention to occupy the property as their home. A VA loan is not a route to an investment property. | 38 U.S.C. 3704 |
| Property condition | The home must meet VA's Minimum Property Requirements, checked by a VA-assigned appraiser who also issues the Notice of Value. | 38 CFR 36.4301; VA Lenders Handbook M26-7, Chapter 12 |
Floor one
Who it fits
The usual guidelines. Every one of them is a starting point that an underwriter reads against the whole file, so treat a line you miss as a conversation rather than a closed door.
- A Certificate of Eligibility, based on qualifying service as a veteran, service member, National Guard or Reserve member
- Eligible surviving spouses may qualify in their own right
- You must certify that you intend to occupy the property as your home
- Income and credit sufficient under VA's residual income and debt ratio guidelines
- The property must pass a VA appraisal against VA's Minimum Property Requirements
- The loan amount with no down payment is limited by your remaining entitlement, not by a national cap
Ground floor
How it goes, top to bottom
Get the Certificate of Eligibility
It confirms your service qualifies and shows how much entitlement is available. If you have used the benefit before, this is the document that tells you whether a zero-down second loan is possible.
Decide what the funding fee should be
Check first whether you are exempt — many borrowers are and do not know it. If you are not, work out what 5% or 10% down does to the fee, and whether financing the fee or paying it at closing suits you better.
Pre-approval and the offer
VA underwriting looks at residual income — what is left each month after the mortgage, taxes, debts and a regional living allowance — as well as the usual ratios. It is a different test from the conventional one and it can be more generous.
The VA appraisal and Notice of Value
A VA-assigned appraiser sets the value and checks the Minimum Property Requirements. If the value is short of the price, the escape clause lets you leave rather than pay the gap.
Underwriting and closing
Conditions are cleared, the funding fee is settled or financed, and you check the Closing Disclosure against the Loan Estimate — including the fee, which should match what your down payment tier and use count say it should be.
VA against a low-down-payment conventional loan
| Feature | VA | Conventional |
|---|---|---|
| Down payment | None with full entitlement | 3% to 5% depending on the programme |
| Monthly mortgage insurance | None, at any loan-to-value | Borrower-paid PMI while above 80% LTV |
| One-time fee | Funding fee of 1.25% to 3.30%, by down payment and use — waived for exempt borrowers | None |
| When does the insurance cost end? | It was paid once, at closing | PMI ends at 80% of the original value on request, 78% automatically |
| Who may use it | Eligible veterans, service members and certain surviving spouses, with a Certificate of Eligibility | Anyone who qualifies on credit, income and assets |
| Occupancy | You must certify you intend to live there | Primary home, second home or investment property |
| If the appraisal comes in low | The VA escape clause lets you withdraw and recover your deposit | You renegotiate or make up the difference in cash |
This table scrolls sideways on a narrow screen.
Questions this raises
Am I exempt from the funding fee?
You are if you receive VA compensation for a service-connected disability, if you are a Purple Heart recipient serving on active duty, or if you are an eligible surviving spouse. A borrower who is entitled to compensation but is receiving retirement or active-duty pay instead is also generally exempt. Your Certificate of Eligibility states the exemption status, and if a disability rating is granted after closing the fee may be refundable — it is worth asking rather than assuming.
Is there a VA loan limit?
Not for a borrower with full entitlement. What is limited is how much the VA will guarantee when part of your entitlement is already tied up in another VA loan, and that remaining-entitlement calculation uses the county conforming limit as its reference. So a first-time user with full entitlement faces no cap; someone keeping a previous VA loan usually does, and often needs a down payment on the second.
Do VA loans really have no mortgage insurance?
Correct, and it is worth stating plainly because it is the single largest difference from FHA. There is no monthly mortgage insurance on a VA loan at any loan-to-value, including 100%. The funding fee is a one-time charge, not a premium that recurs, and for exempt borrowers there is no charge at all.
Should I put money down on a VA loan?
It is a genuine trade. Money down reduces the funding fee from 2.15% to 1.50% at 5%, and to 1.25% at 10% — and on a subsequent use it drops it from 3.30% to 1.50%, which is a very large saving. It also means you are not starting above the value of the house. Against that, cash in the house is cash you cannot reach. Run the fee both ways before deciding.
Put your own numbers through it
What is the VA fee on this loan? The va funding fee page prints the rule it followed beside the answer, and the address bar carries your inputs so the link you send is the answer you saw.
Or read every programme side by side.