Somebody at a barbecue tells you a VA loan means buying a house with nothing down and no mortgage insurance. That part is true. What usually gets left out is the funding fee, the appraisal rules, and the fact that your lender still wants to see a residual income calculation that most loan officers have to look up twice.
If you’ve never bought a home before and you have military service behind you, the VA loan is usually the strongest tool in the box. It’s also the one with the most moving parts. Here’s what actually matters in the first 90 days.
Who qualifies as a first-time buyer on a VA loan
The phrase “first-time buyer” means something different here. The VA doesn’t care whether you’ve owned before. It cares whether you have qualifying service, and whether you have enough entitlement left to cover the purchase.
The usual paths in:
- 90 continuous days of active duty in wartime, or 181 days in peacetime
- Six years in the National Guard or Reserves
- A surviving spouse of a service member who died in the line of duty (unremarried)
- Certain public health officers and cadets at federal service academies
Two things trip people up constantly. First, a general discharge under honorable conditions can knock you out entirely, even with a clean record otherwise. Second, if you have a spouse who also served and you’re both on the loan, entitlement gets complicated fast. There’s a fuller breakdown of the service and credit rules in this guide to VA loan eligibility and who actually qualifies, and it’s worth ten minutes before you talk to a lender.
How the zero-down structure really works
VA loans don’t require a down payment. Not a small one, not a “technically you should put something down” one. Zero. In 2025, with the conforming loan limit at $806,500 and full entitlement, you can finance the entire purchase price plus the funding fee in most cases.
That matters more than people realise. On a $375,000 house, a 5% down conventional loan means writing a $18,750 check at closing and paying private mortgage insurance every month until you build 20% equity. A comparable VA loan means no down payment and no monthly PMI, ever. The mechanics of how $0 down on a VA loan actually works go deeper, including the second-tier entitlement math if you’ve used the benefit before.
What zero down does not cover
You still need cash for three things: the appraisal and inspection, the closing costs, and whatever the seller won’t concede. Budget roughly 2% to 3% of the purchase price for closing costs, though it varies hard by state. On a $350,000 purchase in a higher-cost state, plan on $7,000 to $10,000.
Here’s the lever most first-timers miss. VA rules let the seller pay up to 4% of the price in concessions, and that money can cover your origination fee, title insurance, and prepaid taxes. In a buyer’s market, ask for it. It’s often easier to negotiate $8,000 in seller credit than an $8,000 price cut, because the seller’s net is similar but you keep your cash.
The funding fee is the number nobody mentions
This is the VA’s version of an up-front mortgage insurance premium, and it catches first-time buyers off guard because it’s often financed quietly into the loan balance instead of shown as a line item you feel.
For a first use with nothing down, it’s 2.15% of the loan amount. On a $350,000 loan that’s about $7,525. Put 10% down and it drops to 1.25%. Use the benefit a second time with nothing down and it jumps to 3.3%. Veterans with a service-connected disability rating, and surviving spouses who qualify, are exempt entirely.
The rates shift based on down payment and prior use in ways that aren’t obvious, so check who pays 3.3%, who pays 1.25%, and who pays nothing before you set your budget. An exempt buyer and a second-use buyer on the same house can differ by $15,000 in loan balance.
Getting your Certificate of Eligibility first
Your COE is the document that proves your entitlement to the lender. You can pull it through the VA’s eBenefits portal, and most lenders will order it for you, but I’d get it yourself first. It takes about ten minutes with a login, and it tells you your entitlement code and remaining balance.
Reading it correctly is its own skill. A first-time buyer with full entitlement will show a code that means no county loan limit applies to them. Someone who assumed a VA loan or defaulted on one years ago may see a reduced figure that changes their maximum purchase price. The step-by-step on getting your Certificate of Eligibility explains the entitlement codes line by line, which saves a confusing phone call later.
What underwriters look at beyond your credit score
The VA doesn’t set a minimum credit score. Lenders do, and most land between 620 and 640. That surprises people who assume a government-backed loan is lenient across the board.
What’s genuinely different is residual income. After your mortgage, taxes, insurance, car payments, and other debts, the VA wants to see a specific dollar amount left over each month based on your region and family size. A family of four in a mid-cost county might need $1,000 remaining; the same family in a high-cost county might need $1,600. A first-time buyer with a 700 score can still get declined on residual income alone, and it’s the single most common reason a VA pre-approval collapses.
Debt-to-income guidelines sit around 41%, but the VA allows lenders to go higher with compensating factors like reserves or a long history of on-time rent. Ask your loan officer to run the residual income calculation before you make an offer, not after.
The appraisal is stricter than a conventional one
A VA appraisal isn’t just a value opinion. The appraiser also checks minimum property requirements: no peeling paint, a working heat source, safe electrical, no rotting wood, and a roof with remaining life. A house that passes a conventional appraisal can fail a VA one over a $400 handrail.
That’s not a reason to avoid the program. It’s a reason to write your offer with a clear picture of the property’s condition, and to avoid bidding on a fixer that needs cosmetic work you planned to do after closing. Sellers sometimes reject VA offers out of misunderstanding, which is why a good buyer’s agent who explains the process in the offer letter is worth their commission.
Where the VA loan beats conventional, and where it doesn’t
On a first purchase with limited savings, the VA loan almost always wins. No down payment, no PMI, a lower rate than most conventional offers, and a seller concession allowance that covers a chunk of your closing costs. It’s also assumable, which is a real selling point if rates climb later.
It loses ground if you’re buying a property that won’t pass the appraisal, if you’re buying an investment property (the VA requires you to occupy within 60 days), or if you have a large down payment and a strong conventional profile where loan-level pricing adjustments work in your favour. If you’re weighing both, this honest look at conventional loan pros and cons breaks down where the 20% down myth actually costs first-time buyers money.
One more cost to plan for: your closing day bill will include lender fees, title work, recording, and prepaid escrows, and the Loan Estimate only shows some of them accurately. Compare the numbers in this walkthrough of VA loan closing costs at the table so the final figure isn’t a surprise.
Your first three moves
- Pull your COE and confirm your entitlement code today
- Get a pre-approval from a lender who closes VA loans regularly, not one who does two a year
- Ask for a residual income calculation in writing before you shop
Then set your ceiling based on the payment you can cover in a bad month, not the one the lender approves. The VA loan gives first-time buyers room to buy with almost no cash on hand, and the discipline of a real budget is what keeps that advantage from turning into a stretched payment five years in.