A $360,000 house with nothing down. That’s the pitch you hear about the VA loan, and for once the pitch is accurate. Eligible veterans, active-duty service members, and surviving spouses can finance 100 percent of a home’s purchase price, with no down payment and no monthly mortgage insurance premium folded into the payment.
The gap between “100 percent financing” and “you walk in with a checkbook and nothing else” is where buyers get surprised. There are closing costs, a funding fee, prepaid interest, and an appraisal that can quietly knock the whole structure down. Here is what the program actually covers, and what it leaves on your side of the table.
What 100 percent financing covers, and what it doesn’t
The VA guarantee applies to the purchase price. If the home appraises at $360,000 and you agree to pay $360,000, the VA will back a loan for the full amount. Nothing in the program requires you to bring equity to closing.
What it does not cover:
- Closing costs. Title insurance, escrow and settlement fees, recording, lender origination, and the appraisal typically run 2% to 3% of the price. On a $360,000 home, budget $7,200 to $10,800.
- Prepaid items. You’ll fund an escrow account for property taxes and homeowners insurance, plus pay per-diem interest from closing day to the end of the month.
- The VA funding fee, unless you’re exempt from it.
None of that has to come out of your savings. Sellers can contribute and lenders can credit. But somebody pays, and it helps to know who before you sign. If you want the line-by-line version of what a no-down-payment purchase costs at the table, this breakdown of what you’ll actually pay for a zero down VA home loan is worth ten minutes before you tour anything.
The funding fee is the cost that hides inside your loan
Most first-time VA buyers putting nothing down pay 2.15% of the loan amount as a funding fee. On a $360,000 loan, that’s $7,740. Use the entitlement a second time and the rate climbs to 3.3%, or $11,880 on the same loan.
The fee gets rolled into the balance, which is exactly why so many borrowers never notice it. You aren’t writing a check, but you are paying interest on that $7,740 for thirty years. At 6.5%, it adds roughly $49 to the monthly payment and about $17,600 in interest over the life of the loan.
Some borrowers skip it entirely. A VA disability rating of 10% or higher exempts you, and the exemption extends to surviving spouses receiving Dependency and Indemnity Compensation. If you think you qualify, get the documentation to your lender at application rather than at closing, because it changes both your loan amount and sometimes your pricing. To see how the percentage moves at different loan sizes and usage, work through this VA funding fee calculator guide.
Who actually gets full 100 percent financing
Full entitlement is the whole ballgame. You have it if you’ve never used a VA loan, or if you used one, paid it off, and disposed of the property. There’s also a one-time restoration available if you paid a prior VA loan in full but still own the home.
Borrowers with full entitlement face no VA loan limit. Since the Blue Water Navy Act took effect in 2020, the VA stopped capping zero-down loans at the conforming limit, so a $900,000 purchase with nothing down is possible if a lender approves it and the appraisal supports the price. Lenders set their own ceilings above the conforming limit, so an oversized VA loan usually means shopping more than one bank.
When your entitlement isn’t full
If you still own a home with an active VA loan, you have remaining entitlement rather than full. Most lenders will approve another zero-down purchase up to the county conforming limit. Above that, expect a down payment equal to 25% of whatever exceeds your remaining entitlement.
A real example: $60,000 in remaining entitlement on a $450,000 purchase. Your entitlement supports a $240,000 loan with nothing down. The $210,000 above that requires $52,500 in cash. That’s the point where a second VA loan stops being free, and where you want a loan officer who can run the entitlement math correctly the first time.
Requirements that have nothing to do with the down payment
Zero down does not mean zero scrutiny. Lenders stack their own credit and income standards on top of the VA’s, and the property has to clear minimum property requirements. Peeling paint on a 1950s garage or a missing handrail on a back staircase can stall a closing for two weeks. The VA home loan requirements walkthrough covers what the VA, the lender, and the appraiser each want to see.
The usual thresholds:
- A 620 credit score at most lenders, though the VA itself sets no minimum
- Debt-to-income around 41%, with room above that when residual income is strong
- Residual income that clears regional thresholds based on family size and loan size
Where 100 percent financing breaks: a low appraisal
The VA’s amendatory clause protects you here. If the appraisal lands under the contract price, you are not obligated to proceed and you get your earnest money back. Your options are to renegotiate with the seller, bring cash for the difference, or walk away.
On a $360,000 contract with a $348,000 appraisal, keeping the deal alive costs you $12,000 in cash if the seller won’t budge. That is a 3.3% down payment in everything but name. It’s also why experienced VA buyers write contracts with some breathing room rather than stretching to the top of their approval.
How to keep cash to close small
- Ask for seller concessions. VA rules let the seller pay all of your closing costs and prepaids, plus up to 4% of the loan amount in additional concessions.
- Finance the funding fee. It raises your balance, not the cash you bring.
- Take a lender credit. A slightly higher rate in exchange for a credit toward closing costs. Worth it if you expect to move or refinance within seven years.
- Close late in the month. Prepaid interest runs from closing day to month end. Closing on the 28th instead of the 5th saves about three weeks of interest.
- Shop the title company. Ask about a reissue rate if the property was insured recently. It can cut the premium by 30% or more in some states.
Comparing 100 percent offers when the rate isn’t the whole rate
Two lenders can both quote 6.25% and hand you very different loans. One may charge two discount points, the other none. One may estimate property taxes low to make the payment look friendlier. Put the Loan Estimates side by side and read page two and page three carefully: origination charges, services you can shop for, and the total closing costs figure. This guide to running a VA loan rate comparison shows how to spot a weak quote before you lock.
It’s also worth seeing how the VA stacks up against the obvious alternative. FHA requires 3.5% down and charges mortgage insurance for the life of most loans, which on a $360,000 purchase means $12,600 upfront plus a monthly premium that never drops off. This VA vs FHA mortgage rate comparison explains why the headline rate on an FHA loan rarely tells the full story.
The trade-off of financing every dollar
Buying with nothing down means no equity on day one. If values dip 5% and you need to sell, you’re writing a check at closing instead of cashing one. Run the payment against your actual budget at 100% of what you qualify for, then again at 85%. The second number is usually the one that survives a job change or a furnace replacement in February.
Factor in escrow shocks, too. A new escrow analysis two years in, after a tax reassessment and an insurance renewal, is one of the most common reasons VA buyers suddenly feel house-poor. Ask your lender to estimate taxes at the post-sale assessed value, not the seller’s current bill.
Six questions worth asking your lender this week
- Is my funding fee 2.15% or 3.3%, and do I qualify for an exemption?
- Is that rate quoted with or without discount points?
- What is my total cash to close, including escrow deposits and prepaid interest?
- Does your company lend above the conforming limit for borrowers with full entitlement?
- What seller concessions will you accept written into the contract?
- If the appraisal comes in 5% low, what happens to my earnest money?
Get those same six answers from a second lender before you’re under contract. The difference between a solid 100 percent VA loan and an expensive one is usually a handful of phone calls made early, not a negotiation after the inspection deadline passes.