VA Loan Articles
The Elimination of Down Payment Assistance ProgramsOne version of a commonly asked question about VA home loans goes like this:
"I have pre-approval for a house, but I need help with the down payment. Can I get help that is not a loan?"
Since VA home loans have a no-money-down or zero down payment option, this question might seem a bit out of place, but there's a reason why some borrowers would ask. (And yes, this article is based on actual questions that come in about VA home loans.)
Some borrowers prefer to put money down because it lowers the cost of the loan including the VA funding fee, which is based in part on down payment percentages. Making a down payment is a sensible option for those who can afford to do so. Others may actually be required to make a down payment on a VA guaranteed loan for reasons we'll cover below.
At one time you may have heard about down payment assistance programs offered by charitable organizations; such programs were offered to qualified borrowers applying for FHA home loans, and it's easy to assume there are similar programs for VA guaranteed loans.
Down payment assistance programs such as Ameridream, Grant America, and Nehemiah were common in the past, but in 2008 a bill was passed (H.R. 3221) that eliminated down payment assistance from charities.
VA loans are different than those formerly assisted by down payment assistance programs including FHA mortgages--FHA home loans require a minimum cash investment of 3.5% up front as a down payment, whereas VA loans can be underwritten with no down payment.
The borrower is entitled to apply for a no money down VA home loan, but the lender could still require a down payment under some circumstances--for example, borrowers who have credit issues and don't qualify for the best interest rates or terms may be required to make a down payment. Down payments for VA mortgages are also be needed in cases where the sale price on a home purchased with a VA loan exceeds the appraised value of the property.
To address the specific question of down payment assistance, there are still some home buyer assistance programs--these are often run by state and local governments. A feature of some of these assistance programs is the minimum cash investment by the applicant--which means some form of money down may still be required.
Whether or not such programs are available for VA home loans depends on the program itself. Look up home buyer assistance programs in your area to learn more about specific programs that may apply for those seeking homes purchased with a VA guaranteed loan.