Mortgages backed by the U.S. Department of Veterans Affairs (VA loans) come with a bunch of benefits, but one tends to get the most press. And for good reason. 

With a VA loan, you can get a mortgage with 0% down. That’s a game changer, making homeownership much more accessible to eligible veterans and active-duty service members. 

Avoiding a down payment often makes it possible to buy a house sooner. If you’ve been hoping to buy your first home or upgrade/downsize, the idea of no money down is probably pretty appealing. So let’s look at how it works. 

How the VA makes it possible to put 0% down

Mortgage lenders typically require a down payment as a way to lower risk. Still, most people don’t need to put the 20% down they imagine. 

Conventional loans set the minimum down payment for borrowers at 3.5%, for example. Even that relatively small chunk of money helps to make sure the house is worth what the homebuyer borrows. That prevents them from being underwater on their mortgage. 

That’s not purely for your own financial protection. If you stop making mortgage payments, the lender can seize the house and sell it to recoup their losses. Without a down payment, there’s some concern that the house will be worth less than the loan, meaning they take a loss.

That’s the case with conventional loans, where only the borrower (that’s you) and the mortgage lender are in play. But with a VA loan, a third party enters the scene: the VA. 

You don’t get this kind of loan straight from the VA (except in the case of Native American Direct Loans). Instead, you work with a mortgage lender just like you would for a conventional loan. The difference is that the VA backs a portion of your loan.

Specifically, with full entitlement (more on that below), the VA backs (or guarantees) 25% of your loan. That means that if you don’t repay what you borrow from the lender, the VA will pay the lender out to the tune of 25% of your loan amount. 

This dramatically lowers risk for the lender. The VA’s guarantee behind your loan is what makes it possible to get a mortgage with 0% down. 

0% down with no mortgage insurance

Some loan programs require mortgage insurance. This gives lenders a way to lower their risk if the borrower doesn’t put enough money down. But VA loans are different. 

As we mentioned before, you can get a conventional mortgage with way less than 20% down. But if you put less than 20% down, you’ll need to pay for private mortgage insurance (PMI). This adds money (often hundreds of dollars) to your monthly mortgage bill. You have to keep paying PMI until you reach 20% equity in your house. 

If you get a loan backed by the Federal Housing Administration (FHA), you avoid PMI, but you have to pay for a different kind of mortgage insurance. FHA mortgage insurance premiums (MIPs) add both an upfront and ongoing cost to your mortgage.

With a VA loan, you can put less than 20% down — all the way to 0% down — without having to cover any form of mortgage insurance. (You will need to pay the VA funding fee. But that’s just part of the loan program, not an added cost you need to cover to lower lender risk.) 

Putting 0% down if you’ve had a VA loan before

The VA backs 25% of the loan for eligible veterans and service members with full entitlement. Once you get a VA loan, you use up part of your entitlement. That doesn’t mean you can’t get a VA loan again. But it does affect your ability to get another VA loan with 0% down. 

This gets a little technical, but here’s the short version: To be eligible for another 0% down mortgage, you need to have enough entitlement to cover 25% of the house you want to buy. If you fully pay off your previous VA loan and sell the house, you restore your full entitlement. The VA also offers a one-time entitlement restoration option. 

Beyond that, you’ll need to crunch some numbers to see if you have enough entitlement for the house you want to buy. We’ve got an entitlement calculator to help you there. 

0% down doesn’t mean $0 out of pocket

0% down might sound too good to be true. If you’re thinking it means you get the keys to a house with $0 out of pocket, you’re right. While you won’t need to cover a down payment with a VA loan, you’re still subject to closing costs.

For starters, VA loans require the aforementioned VA funding fee (with certain exemptions). You do have the option to roll that fee into your loan amount. But you avoid paying interest on it if you pay it upfront at closing.

You’ll also need to pay a loan origination fee. This is money you pay to the lender for the services of creating your loan. The VA caps origination fees at 1% of the loan amount.

At or before the closing table, you typically also need to pay to have the house professionally appraised, to have its title searched, and to record the sale with your local authorities. So that means you need to be ready to hand over some money — usually thousands of dollars — in exchange for your keys.

Still, with 0% down, VA loans are one of the most accessible paths to homeownership. If you’re eligible for this kind of mortgage, start shopping for interest rates on your VA loan today.