The guaranty stands in for a down payment
The Department of Veterans Affairs does not write mortgages. It guarantees loans made by banks, credit unions, and mortgage companies, promising to repay the lender up to a quarter of the loan if the borrower defaults. That promise does the work a down payment and PMI would otherwise do, which is why an eligible borrower can buy with nothing down and no monthly insurance charge.
The program began with the GI Bill of 1944 and has backed millions of home purchases since. Applying works like any mortgage: you pick a VA-approved lender, not the VA itself, and the lender handles two extra items, a Certificate of Eligibility and a VA appraisal.
Know the funding fee before you apply
The funding fee is the program's one significant cost, a single charge that scales with your down payment and whether you have used the benefit before. The current fee schedule and exemption rules are published on VA's funding fee page. On the default zero-down $400,000 purchase the fee is $8,600, and financing it into the loan adds about $53 a month at 6.25 percent over 30 years.
- First use: 2.15 percent with nothing down, 1.50 percent at 5 percent down, 1.25 percent at 10 percent or more.
- Subsequent use with nothing down: 3.30 percent.
- Exempt entirely: veterans receiving service-connected disability compensation, Purple Heart recipients on active duty, and qualifying surviving spouses.
- The IRRRL streamline refinance carries a reduced 0.50 percent fee; a VA cash-out refinance uses the regular schedule.
- Paying the fee in cash at closing avoids the interest that financing it adds over the term.
A modest down payment still lowers the fee
Skipping the down payment preserves cash, and for many buyers that is decisive. But the fee schedule quietly rewards even a modest down payment. Five percent down on the $400,000 default, which is $20,000, drops the fee tier from 2.15 to 1.50 percent and shrinks the base loan at the same time, cutting the fee from $8,600 to $5,700.
There is no single right answer. A borrower with thin savings should keep the cash and take the zero-down structure the program was built for. A borrower choosing between a bigger down payment and a slightly nicer house has a genuine trade to weigh, and the fee tiers belong in that math.
Entitlement sets the zero-down ceiling
Entitlement is the slice of your loan the VA promises to cover, and it determines how much you can borrow without a down payment. A borrower with full entitlement faces no VA loan cap at all: the ceiling is whatever a lender will underwrite. Entitlement comes back when a VA loan is paid off and the home sold, and a one-time restoration exists for borrowers who paid off the loan but kept the house.
Reduced entitlement is where limits bite. If part of your entitlement is tied up in an existing VA loan or was lost to a foreclosure, zero-down borrowing is capped by county limits that track the conforming loan limits, which the Federal Housing Finance Agency resets each year; VA explains how they apply on its VA loan limits page. Above that cap, a new loan needs a down payment on the portion your remaining entitlement cannot cover. A VA-experienced lender can compute the exact figure from your Certificate of Eligibility.
The appraisal follows VA rules
Once you are under contract, the lender orders an appraisal through the VA's rotation panel, so neither you nor the lender picks the appraiser. The report usually takes one to two weeks, costs roughly $500 to $800 depending on the state, and covers two questions: what the home is worth, and whether it meets the VA's Minimum Property Requirements for safe water, adequate heat, a sound roof, and similar basics.
A low valuation is not the end of the deal. You can negotiate the price down to the appraised value, cover the gap in cash, or ask for a Reconsideration of Value supported by better comparable sales. If none of that works, the VA's required escape clause lets you walk away with your earnest money.
Plan on a month to six weeks
VA purchases close on ordinary timelines, typically 30 to 45 days from contract. The Certificate of Eligibility rarely slows anything down, since lenders pull most COEs electronically in minutes; the fallback is to request a COE yourself online or by mailing Form 26-1880. Underwriting reviews income, credit, and assets like any loan.
Three business days before closing you receive a Closing Disclosure listing every final cost. Compare it against your earlier Loan Estimate line by line; the CFPB's closing resources explain which fees are allowed to change and which are not. One occupancy note: VA financing is for primary residences, and you are generally expected to move in within about 60 days of closing.
The benefit can be used again
VA eligibility is not a one-shot voucher. Sell the home and pay off the loan, and the entitlement restores for the next purchase. Keep the home, and remaining entitlement can still support a second VA loan, which is how service members under new orders end up with a VA-financed rental in one state and a VA-financed residence in another.
Two costs attach to reuse. The funding fee rises to 3.30 percent for a subsequent zero-down loan, and a second simultaneous loan may require a down payment if it outruns your remaining entitlement. Neither changes the core fact that the benefit stays available for life.