VA loans: Zero down does not mean zero cash


Twenty-two million military veterans have used Veterans Administration loans to purchase a home, yet even today — 74 years after the program’s inception — some applicants incorrectly believe zero down payment means zero cost.

For veterans and active military, VA loans are a fantastic way to achieve the dream of home ownership. But just like any home purchase, advance planning is essential, which includes having enough cash on had to pay closing costs. The goal of VA loan-savvy Realtors is to save veterans money while preparing them for the inevitable expenses attached to any home purchase.

The amount needed to close varies depending on location, yet vets typically will need to have about 3 percent of the purchase price on hand to close escrow.

According to a report on, some of the home-buying costs that veterans and active military should expect include:

Credit report—Even if a purchase does not close, buyers can expect to pay about $30 for a nonrefundable credit report when applying for a home loan.

Earnest money—An earnest money deposit – ranging from 1 percent to 10 percent or higher – is key to the home-buying process. It allows a buyer to put a “hold” on a house while they conduct the inspections and appraisal. Earnest money can apply toward the down payment and closing costs when escrow opens. Depending on the reason why a purchase falters, there’s a chance a buyer could lose some or all of their deposit.

Appraisal—All VA loans require an appraisal to ensure the property meets acceptable standards, satisfies the VA’s minimum property requirements, and confirms the property is worth the price offered. VA buyers often pay for the appraisal upfront, but may be able to recoup the cost at closing.

Home inspection—The home inspection – ranging from $300 to $500 – offers a crucial opportunity to uncover problems with a house before making it official, such as spotting pest problems or discovering needed repairs.

Recording fees—Each sale must be recorded with the county, with the the cost varying from county to county.

Title insurance—Title insurance protects the buyer and lender in the event there are lingering title issues from previous owners of the home. The average cost of title insurance is around $1,000 per policy, but that amount can vary and depends on the price of the home.

HOA fees—If buying a home that is part of a homeowners association, there may be application or document copying fees, along with monthly dues that vary depending on the size of the unit and the amenities.

Loan origination fees—The VA allows lenders to charge up to 1 percent of the loan amount to cover origination, processing, and underwriting costs.
VA loans are a great option for any veteran hoping to buy a house. Working with an experienced Realtor can prepare buyers and save money while eliminating surprises.

M. Dean Vincent is the 2018 Chairman of the Santa Clarita Valley Division of the 9,800-member Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.

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