Do VA Loans Require a Down Payment?
One of the biggest advantages of the VA loan is the ability to buy a home with no money down. But there are situations where a down payment may still apply — here’s everything veterans need to know.
The Standard Answer: No Down Payment Required
For veterans with full VA entitlement, no down payment is required — as long as the purchase price doesn’t exceed the home’s appraised value. This applies to loan amounts of any size. In California, this is one of the most powerful financial benefits available to any homebuyer.
When a Down Payment May Apply
| Situation | Why a Down Payment May Be Needed |
|---|---|
| Partial entitlement (existing VA loan active) | Remaining entitlement may be less than 25% of the new loan — veteran covers the gap |
| Purchase price exceeds appraised value | VA only guarantees up to appraised value — difference must be paid in cash |
| Loan amounts above $2,500,000 | Maximum LTV may be capped at 90%, requiring 10% down |
Making a Voluntary Down Payment to Reduce the Funding Fee
| Down Payment | First-Time Use Fee | Subsequent Use Fee |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% to less than 10% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
Even when not required, putting 5–10% down can meaningfully reduce the one-time funding fee — and lower the total amount financed.
Gift Funds Are Allowed
Gift funds from an eligible donor with no financial interest in the transaction are permitted for down payments. A signed gift letter is required. Gift funds cannot be used to satisfy reserve requirements.
Want to See Your Purchasing Power?
At Lendia, we’ll calculate your exact entitlement and show you your options with and without a down payment. Get a free rate quote to start.
Funding fee at different down payments (illustrative example, not a quote)
Take a $700,000 purchase, first use of the benefit. With less than 5% down, the 2.15% fee is $15,050 on a $700,000 loan. If you finance it, the loan becomes $715,050. With 5% down ($35,000), the loan is $665,000 and the 1.50% fee is $9,975. With 10% down ($70,000), the loan is $630,000 and the 1.25% fee is $7,875. A larger down payment reduces both the loan balance and the fee, though it takes cash you may prefer to keep for reserves.
Cash you may still need even at 100% financing
VA allows up to 100% financing for eligible borrowers, but the purchase price is not the only cost. California buyers typically pay roughly 2–5% of the price in closing costs, which includes lender, title, escrow and prepaid items. Plan for these too:
- Earnest money. A good-faith deposit with your offer, credited toward your costs at closing.
- Inspection and appraisal fees paid during escrow.
- Prepaids, such as the first year of homeowner’s insurance and initial escrow deposits for taxes and insurance.
The seller can pay reasonable closing costs and up to 4% in concessions, which can close part of that gap when the contract allows it.
Frequently asked questions
Does a bigger down payment help me qualify for a better loan?
It lowers the loan amount and the funding fee. It does not change your eligibility, since VA has no minimum down payment for borrowers with full entitlement.
Can my earnest money deposit come from gift funds?
Gifts can fund a down payment with a signed letter. Earnest money still has to be documented, so tell us where the deposit comes from before you write the check.
Is it worth putting down 5% just to reduce the funding fee?
In the example above, 5% down saves $5,075 in fee ($15,050 minus $9,975) and costs $35,000 in cash. We usually compare that with what else the money could do for you, such as reserves.