Down Payment & Closing Costs

Down Payment

One of the greatest benefits of a VA loan is that it doesn’t require a down payment. The only time a down payment may be required is when the home is located in certain "high-cost areas" as defined by the VA or when the selling price or amount you intend to refinance exceeds.

Here's an illustration of how significant this benefit is when purchasing a home.

Closing Costs

While there are closing costs associated with a VA loan, you may be able to avoid paying for them out-of-pocket—which is yet another great benefit of the VA loan.

While your VA benefit won’t help pay for the closing costs, you have several "non-cash" approaches you can take with closing costs if you want:

• If you’re purchasing a home, you can ask the seller if you can pay closing costs during negotiation. A financial gift from a relative can also be applied toward closing costs.
• If you’re refinancing a home, you can ask your loan advisor to add the closing costs to your loan amount. A financial gift from a relative can also be applied toward closing costs on a refinance loan.
• You may also be able to get a cash-out refinance. The purposes for which the cash-out proceeds will be used are generally subject to approval by the lender.

More Information on a Cash-Out Refinance

With cash-out refinancing, the following requirements must be met:

• Cash-out refinances limit loan amounts to 90% of the value of the home plus the VA funding fee. 
• If there are any existing lien(s) on the property, the borrower must pay it off.
• If you plan on using the cash-out proceeds to pay off existing debts, you must supply an itemization of the debts you intend to pay off with the loan.
• The purposes for which the cash-out proceeds will be used are generally subject to approval by the lender.

*If you’re a service member on active duty planning to refinance a VA loan, be sure to check with your legal counsel on any benefits that may be affected.