Yes, VA Loans Really Do Offer 100% Financing for Home Buyers

VA-guaranteed mortgage loans allow borrowers to purchase a home sooner by providing 100% financing. This means home buyers can finance the entire purchase price without having to make a down payment of any kind.  

It’s a major benefit you won’t find with other types of mortgage loans.  

Surprisingly, though, a recent survey showed that a lot of military members and veterans across the U.S. don’t realize VA loans offer 100% financing. And that’s a shame when you consider that they earned this benefit through their selfless and honorable service to the nation.  

We’ve talked about VA loan benefits before, including the ability to avoid making a down payment. Today, we’ll zero in on the ability to finance 100% of the purchase price when using this home loan program.  

Many Veterans Don’t Understand VA Loan Benefits  

Researchers from Realtor.com recently shared the results of a nationwide survey that included some unfortunate insights on the VA loan program. According to this survey, the majority of veterans and military personnel are unaware that a VA loan can be utilized to finance the whole purchase price. 

To quote the November 2023 Realtor.com report:  

“While many Veterans are aware they have access to Veterans Affairs home loan benefits, which honor their service by making homeownership more accessible, just 3 in 10 know they can use that benefit to buy a home with a zero down payment, according to a new national survey of Veterans and active duty service members.” 

The VA home loans were incepted in 1944 as part of the Servicemen’s Readjustment Act of 1944, also known as the “GI Bill.” The program was designed to help veterans returning from World War II purchase homes and transition back to civilian life.  

Each year, VA loans account for somewhere between 7% and 10% of all mortgage loans generated in the U.S. So, it’s a popular program with huge benefits.  

Some of the benefits of VA loans are: 

• Possibilities of Zero Down Payment 

The VA home loan benefit might help you overcome limits. With $0 down, your home options are not limited by your down payment resources.  

Instead, your money is freed up for other uses, such as home upgrades, schooling, trips, or a rainy-day reserve. Over 20 million military members and veterans have used this incredible opportunity. 

• VA Loan Guaranty 

VA home loans are guaranteed by the government and issued by certified lenders. And, because the VA guarantees a percentage of these loans for lenders, the scheme can provide additional advantages.  

• No PMI and Other Savings 

Aside from the unusual no-down-payment option, the VA home loan program does not permit private mortgage insurance (PMI).  

While a VA Funding Fee of 0.5 to 3.6% of the loan (depending on service and consumption) is normally needed, some borrowers, such as disabled Veterans and surviving spouses, are given an exemption from paying the fee. 

To summarize, cost-saving features include: 

• No possibility of a down payment 
• No PMI (VA funding fee for program usage unless excluded) 
• Competitive interest rates 
• Streamlined financing program 
• Fee caps 

Other benefits include reduced VA mortgage rates and even fewer credit requirements. However, to qualify for VA home loan eligibility, you must fulfill VA or USDA requirements. 

Having your property totally paid for may be quite relaxing, and it can also help you move into your home faster if you don’t have a down payment readily available. 

The Biggest Benefit: 100% Financing   

One of the key benefits of VA loans is that they offer 100% financing. This means that the veteran does not need to make a down payment at all.  

An article on the VA.gov website, entitled “Ten things most Veterans don’t know about VA home loans,” states the following:  

“These are perhaps the biggest advantages to a VA loan. You don’t need a down payment. None whatsoever. Most mortgage programs, such as FHA and conventional loans, require at least 3.5 percent to five percent down. That’s up to $12,500 on a $250,000 home purchase. With a VA loan, you can buy immediately, rather than years of saving for a down payment.”  

As of 2023, the median home value in the U.S. was around $350,000. At that price range, the minimum down payment for an FHA loan (3.5%) would come to $12,250. A 5% down payment on a conventional home loan that’s not backed by the government would amount to $17,500.  

In a pricey real estate market with higher-than-average home values, the down payment could add up to tens of thousands of dollars.  

Because of this, it can take a typical home buyer years to save up for the down payment on a home purchase. But with the 100% financing option that’s available through the VA loan program, buyers can enjoy a much shorter path to homeownership.  

How This Program Helps Borrowers  

A VA loan allows qualified borrowers to finance 100% of the purchase price, allowing them to move into a house sooner rather than later. 

Granted, most borrowers who use this program still have to pay closing costs, and those can add up to thousands of dollars. But by taking the down payment out of the equation, VA home loans greatly reduce the borrower’s upfront expense.  

And that’s just one of the benefits this unique program offers.  

1. A faster path to homeownership 

With 100% financing, you could achieve your dream of house ownership sooner. You do not need to wait until you have saved up a substantial down payment. All you need to do is cover your upfront closing costs.  

2. Keep your savings for other expenses 

Traditional mortgage loans often require a large down payment, which can deplete the borrower’s savings. By covering 100% of the purchase price, VA loans prevent this from happening. You can use the money you save (by dodging the down payment) for other expenses like home repairs, moving costs, or unexpected financial events.  

3. Increased affordability and more homes to choose from 

With no down payment requirement, individuals who might find it challenging to save a large sum for a down payment can still enter the housing market. This increased affordability widens the pool of potential home buyers.  

It also increases your chance of finding a property within your budget. By reducing the upfront costs associated with a home purchase, a VA loan could bring more properties into the affordable category. And that’s a pretty big deal when you consider the current housing inventory shortage in the U.S.  

4. Attractive IRRRL, or Streamline Refinance 

IRRRL refers to an Interest Rate Reduction Refinance Loan, often known as a VA streamline. The VA streamline is a refinancing program that requires fewer documents than any other VA loan available today.  

Moreover, the VA streamline allows an eligible borrower to refinance to a VA loan at a lower interest rate at a lower cost and with less paperwork than was originally necessary for the previous loan. 

5. You Can Apply For Multiple VA Loans In A Row 

If you’ve paid off one VA loan and sold your property, you can still qualify for and get other VA loans as long as you fulfill the income and borrowing requirements. A unique one-time concession may allow you to obtain a VA loan second home financing even if you still own a property that you purchased (and paid off) with your original VA loan. 

What Documents are Required for a VA loan?  

To qualify for VA loan credit requirements and avail of all the attractive benefits like 100 percent home loan financing, you need to provide some important documentation, such as: 

• Documentation for prior locations during the past two years 
• Completed school years and Social Security cards for all applicants 
• General information includes your race and ethnicity, as well as information on your dependents. 

• For veterans, you must send a copy of your DD 214. This is your certificate of release or dismissal from active duty. 
• If you are on active duty, you will need to submit COE Form 26-1880 or acquire a certificate of eligibility.  
   

What to Take Away From All This  

It’s worth repeating: many veterans and military members don’t realize they can buy a home with no down payment at all by using the VA loan program. So, let’s drive this point home by reiterating some of the key points covered in this article.  

VA-guaranteed mortgage loans provide 100 financing, allowing home buyers to finance the entire purchase price without the need for a down payment.  

This benefit sets VA loans apart from other mortgage options, most of which require at least 3% down and sometimes much more.  

A recent survey revealed that many military members and veterans are unaware of this 100 VA loan financing feature.  

The 100% financing available through VA loans accelerates the VA loan approval towards the path to homeownership, bypassing years of saving for a down payment.  

Borrowers can still incur closing costs, but eliminating the down payment significantly reduces their upfront expenses. 

Want to help us spread the word? Link to this article or share it through your social media accounts. Let’s work together to educate this deserving audience on their hard-earned benefits!