What is the Down Payment on a VA Loan?
VA loans do not require down payments because the government guarantees the loan, meaning the lender can recover between 25% and 50% of the borrowed amount in the event of default. (This is why USDA loans do not require down payments, and FHA loans require just a small down payment.) Although it is tempting not to spend a lot of money upfront, putting down a deposit can help you save in the long run.
How much down payment is required for a VA loan?
One of the biggest advantages of a VA loan is its low-interest rate. There is no down payment required. Absolutely none. The down payment on most mortgage programs, such as FHA loans and conventional loans, is between 3.5 percent and five percent. This amounts to $12,500 for a house worth $250,000.
You can buy right away with a VA loan instead of waiting for years to save for a down payment. Additionally, you won’t have to pay high mortgage insurance rates. A $250,000 home would cost $150 per month for private mortgage insurance (PMI) with 5 percent down, according to PMI provider MGIC.
By eliminating PMI, this buyer could afford a home worth $30,000 more with the same monthly payment. With a VA loan, you can save money upfront, while simultaneously increasing your purchasing power. Remember you fees at closing, for more info on what are closing costs in Virginia read here.
Does the VA require a down payment?
If you buy a house with a VA loan, you do not need to make a down payment. Homeownership becomes more affordable for veterans and active-duty military personnel who qualify.
Fees vary based on the loan amount and whether this is your first VA loan. With a down payment of less than 5%, you will pay $5,750 on a loan for $250,000 for your first house. A down payment of 10% or more will result in a payment of $3,500. Some states have different regulations see VA loans Georgia for recommendations in GA.
Who pays the down payment on a VA loan?
Veterans, service members, and survivors pay the VA funding fee one time for their VA home loan that is backed by the VA. Since the VA home loan program does not require down payments or monthly mortgage insurance, this fee helps reduce the cost to taxpayers. A VA loan’s funding fee must be paid when the loan is used to purchase a house. It is a one-time payment that you pay at closing or includes in your mortgage.
How is the down payment for VA loan calculated?
If you want to know how much of your reduced entitlement is left, you need to determine how much is left.
Here is how is the VA down payment calculated:
VA loans are guaranteed up to 25%. You can determine how much of your entitlement you’ve used by multiplying your loan amount by 0.25.
Loan amount × 0.25 = entitlements already used
You will also need to determine your county’s conforming loan limit. Baseline conforming loan limits are $548,250 in 2021. They may be higher in high-cost areas.
Your maximum entitlement is 25% of your county’s conforming loan limit.
County conforming loan limit × 0.25 = maximum entitlement
It is likely that you will not be able to borrow the maximum without a down payment if you have a reduced entitlement. If you have already used some of your entitlement, you can determine how much is left by subtracting it from the maximum entitlement.
Max entitlement x used entitlement = remaining entitlement
VA loan guarantees are capped at the amount of remaining entitlement.
VA guarantees 25% of the loan; multiply your remaining entitlement by 4 to find the maximum you can borrow with no down payment.
Total loan amount with zero down payment = remaining entitlement x 4
What is the maximum down payment VA Loan?
Loans over $144,000 are no longer subject to limits on eligible Veterans, service members, and survivors. You won’t have to make a down payment, and we guarantee to your lender that if you default on a loan over $144,000, we will pay them up to 25% of the amount of the loan. VA-backed mortgage limits refer to the amount we’ll guarantee (the maximum we’ll pay to your lender if you default). To finance a home, we don’t have limits on how much you can borrow.
Financial Consultant and Author