To Clarify: No Down Payment Needed for a VA Loan in California

Eligible home buyers who use a VA loan in California do not need to make a down payment at all. That’s one of the primary benefits offered by the VA loan program, which is available to active-duty military, veterans, and some National Guard and Reservists.

Surprisingly, though, many veterans and military members in the state of California don’t realize they have this wonderful benefit.

A recent survey showed that only 30% of military members realize they can use a VA loan with no down payment whatsoever. That’s an unfortunate finding, especially in a state like California with higher-than-average home prices.

At Bridgepoint Funding, we do everything we can to educate California’s military population on the VA loan program. So today, we will reiterate one of the most important benefits offered by this program…

You do not need a down payment when using a VA loan in California.

70% of Military Members Don’t Understand This Benefit

Earlier today, Realtor.com published the results of a survey with surprising insights relating to the VA loan program. Their survey found that most military members and veterans don’t realize they can buy a home with zero down payment by using a VA-backed mortgage loan.

This survey was part of a broader educational campaign to help veterans and military members understand the benefits they’ve earned through their service.

To quote the November 2023 Realtor.com report:

“While many Veterans are aware they have access to Veterans Affairs home loan benefits, which honor their service by making homeownership more accessible, just 3 in 10 know they can use that benefit to buy a home with a zero down payment, according to a new national survey of Veterans and active duty service members.”

Granted, this was a relatively small survey sent out to several hundred military members and veterans nationwide. They might have yielded better results with a larger survey group. Even so, this shows there are a lot of borrowers in California who could buy a house in California with no down payment—but don’t even know it.

No Down Payment Needed for a California VA Loan

Here’s the most important point to take away from this article. If you meet the minimum eligibility requirements for a VA-guaranteed mortgage loan, you could buy a house in California with zero down payment. None. Nada. Zilch.

The Department of Veterans Affairs provides mortgage lenders with a guaranty on VA loans. This guaranty acts as a safety net for lenders, protecting them against potential losses in the event of a borrower’s default.

With this guaranty, the government pledges to cover a portion of the loan amount if the borrower fails to make payments. This assurance significantly reduces the lender’s risk, allowing them to offer VA loans without requiring a down payment.

As is states on the official VA.gov website:

The VA home loan guaranty is an agreement that VA will reimburse a lender (such as banks, credit unions, mortgage companies, etc.) in the event of loss due to foreclosure. This guaranty takes the place of your down payment.

The benefits don’t end there, however. Home buyers in California who use this program can also avoid paying mortgage insurance. With a regular or conventional home loan, private mortgage insurance is usually required when a borrower makes a low down payment with a loan-to-value ratio above 80%.

But that’s not the case with California VA loans. Using this program, military members and veterans can buy a house with no down payment and no mortgage insurance.

Big Benefits for Borrowers

Home buyers in California can benefit from a no-down-payment VA loan in several ways. Mainly, it allows you to buy a home sooner rather than later, by eliminating one of the biggest hurdles along the path to homeownership. That alone is a pretty big deal.

But there are other advantages as well:

1. Affordability

No-down-payment VA loans make homeownership more affordable for many veterans and service members. This is especially true in California, a state that has some of the highest home prices in the nation. This can make it easier to budget for homeownership and avoid financial strain.

2. Quicker Homeownership

By eliminating the down payment requirement, VA loans can also accelerate the timeline for homeownership. Borrowers can start searching for homes sooner and move into their own homes more quickly.

With a conventional mortgage loan (that’s not backed by the government), a home buyer in California might need to put anywhere from 3% to 20% down. And it could take years to save up for that kind of investment.

3. A Wider Range of Homes

Without the upfront cost of a down payment, borrowers might be able to consider a wider range of homes, including larger or more expensive properties. This can open up more options and allow borrowers to find a home that meets their needs and preferences.

Many cities across California suffer from housing market shortages, and they have for a while. There simply aren’t enough homes on the market to meet the demand from buyers. With its zero-down-payment flexibility, a VA loan can help a buyer overcome this obstacle by bringing more properties into the affordable range.

4. Reduced Savings Burden

No-down-payment VA loans allow borrowers to allocate their savings towards other important financial goals, such as retirement savings or emergency funds. This can help improve their overall financial security and peace of mind.

Help Us Spread the Word and Educate Veterans

This article is part of a broader effort to educate military members and veterans about their VA home loan benefits. You can help us spread the word and educate veterans in several ways:

• Link to this article from your blog or website
• Share it through your social media accounts
• Create a similar article geared toward your audience

Military members earn these kinds of benefits through their selfless and honorable service to the nation. As mortgage and real estate professionals, we should do everything we can to help these borrowers understand and take advantage of their benefits.