For Colorado Veterans, one of the biggest advantages of a VA backed purchase loan is the ability to buy a home without a traditional down payment. In many cases, a qualifying Veteran can purchase with zero down, while still avoiding monthly private mortgage insurance. The VA states that nearly 90 percent of VA backed loans are made without a down payment. 

But zero down is not always the cheapest strategy over the entire life of the mortgage.

A Colorado Veteran with enough available cash may consider putting 5 percent down instead. That decision changes the loan balance, the VA funding fee, the amount of equity established at closing, and potentially the long term interest cost.

The important question is therefore not simply:

"Can I buy with zero down?"

It is:

"Should I use 5 percent of my cash to reduce my mortgage balance and funding fee, or would I be better off keeping that money available?"

The answer depends on the purchase price, interest rate, funding fee status, expected time in the home, cash reserves, and the Veteran's broader financial objectives.

How Zero Down VA Financing Works

The VA home loan program is designed to provide eligible Veterans with access to mortgage financing without requiring a traditional down payment in many circumstances.

Unlike many conventional loans, VA financing also does not require monthly private mortgage insurance. The VA explains that the funding fee helps offset the cost of the program because VA loans generally do not require down payments or monthly mortgage insurance. 

Consider a hypothetical Colorado home priced at:

$500,000

With zero down:

Down payment: $0

Base loan amount: $500,000

The Veteran preserves the entire $25,000 that would otherwise have been required for a 5 percent down payment.

That liquidity can be valuable.

But the Veteran also finances a larger mortgage balance.

How 5 Percent Down Changes the Loan

With the same $500,000 purchase price:

5 percent down: $25,000

Base loan amount: $475,000

The Veteran immediately starts with $25,000 of equity from the down payment.

There is another important difference.

For eligible borrowers who are not exempt from the VA funding fee, a 5 percent down payment reduces the funding fee percentage.

For VA purchase loans under the current funding fee schedule:

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These rates apply to the applicable loan amount, and Veterans who qualify for a funding fee exemption do not pay the fee. 

This makes the comparison more interesting than simply:

$25,000 less mortgage debt.

The 5 percent down payment can also reduce the funding fee percentage.

Example: $500,000 Colorado Home

Consider a hypothetical first time VA loan user who is not funding fee exempt.

Zero Down

Purchase price:

$500,000

Down payment:

$0

Base loan:

$500,000

Funding fee:

2.15% × $500,000 = $10,750

If financed, the approximate total loan balance becomes:

$510,750

Five Percent Down

Purchase price:

$500,000

Down payment:

$25,000

Base loan:

$475,000

Funding fee:

1.50% × $475,000 = $7,125

If financed, the approximate total loan balance becomes:

$482,125

The difference in financed balance is approximately:

$28,625

That includes:

$25,000 lower base mortgage

plus:

$3,625 lower funding fee

The exact loan structure and final costs will depend on the lender and borrower's circumstances.

The Funding Fee Makes the 5 Percent Decision More Significant

The VA funding fee is a one time charge rather than monthly mortgage insurance.

The VA permits eligible borrowers to finance the funding fee into the loan or pay it at closing. 

For Veterans who are not exempt, moving from zero down to 5 percent down can reduce the funding fee percentage from:

2.15% to 1.50%

for first use.

For subsequent use, the reduction can be even more significant:

3.30% to 1.50%.

This can make a 5 percent down payment particularly relevant for a Veteran using the VA benefit again.

However, the Veteran should not assume that paying 5 percent down is automatically better.

The cash used for the down payment has an opportunity cost.

Zero Down Preserves $25,000

Using the $500,000 example, choosing zero down means keeping:

$25,000

in the bank.

That money could potentially remain available for:

• Emergency reserves
• Home improvements
• Moving expenses
• Furniture
• Repairs
• HOA assessments
• Property taxes
• Investment
• Other financial priorities

A Veteran who uses all available savings for a down payment may reduce the mortgage balance but also reduce financial flexibility.

That tradeoff deserves serious consideration.

5 Percent Down Creates Immediate Equity

The opposite is true with a 5 percent down payment.

The Veteran begins with:

$25,000

of purchase equity on a $500,000 property, before considering closing costs, appreciation, or other factors.

That can reduce the initial loan to value ratio.

It also reduces the amount of interest paid because the mortgage balance is lower.

But initial equity does not necessarily mean better overall financial results.

The home could decline in value after closing.

For example:

Purchase price: $500,000

5 percent down: $25,000

Starting loan: $475,000

If the property's value later falls to:

$450,000

the Veteran's equity position changes substantially.

The down payment does not eliminate market risk.

Long Term Interest Cost

The biggest financial advantage of putting 5 percent down is the smaller principal balance.

Assume:

Zero down base loan: $500,000

5 percent down base loan: $475,000

At the same interest rate and loan term, the $475,000 loan will generally produce a lower monthly principal and interest payment and lower interest expense over time.

For illustration, assume a hypothetical fixed rate of:

6.50%

and a:

30 year term

The principal and interest payment on $500,000 is approximately:

$3,160 per month

The payment on $475,000 is approximately:

$3,002 per month

The difference is approximately:

$158 per month

These figures are illustrative and exclude taxes, insurance, HOA dues, funding fee financing, and other costs.

Over 10 years, the nominal payment difference would be approximately:

$158 × 120 = $18,960

That does not mean the Veteran automatically saves $18,960 because the analysis also needs to account for the initial $25,000 cash contribution, funding fee differences, amortization, and the eventual loan balance.

That is why a long term cost analysis is more useful than simply multiplying the monthly savings.

The $25,000 Is Not an Expense in the Same Way as Interest

This is an important distinction.

When a Veteran puts $25,000 down, that money does not disappear.

It becomes equity in the property.

Interest, however, is a borrowing cost.

Suppose the Veteran has two choices:

Option A: Keep $25,000 in cash and borrow more.

Option B: Invest $25,000 into the property and borrow less.

Option B reduces interest expense.

Option A preserves liquidity.

The financial comparison therefore depends on what the Veteran could reasonably do with the $25,000 if it remains available.

Opportunity Cost Matters

Imagine a Veteran has $60,000 in liquid savings.

A 5 percent down payment requires:

$25,000

That leaves:

$35,000

before accounting for other closing and moving expenses.

Now consider another Veteran with only:

$30,000

in available savings.

A $25,000 down payment would leave only:

$5,000

before other expenses.

The 5 percent strategy might be much less attractive for the second Veteran because the remaining cash reserve could be too small.

This is why the decision should be based on the Veteran's financial position rather than a generic recommendation.

Zero Down Can Be Valuable in Colorado's Higher Cost Markets

Colorado has several markets where home prices can require substantial cash to reach even a modest percentage down payment.

Consider a:

$700,000 home

A 5 percent down payment requires:

$35,000

A 10 percent down payment requires:

$70,000

For some Veterans, preserving that cash may be more valuable than reducing the mortgage balance.

The VA purchase loan's ability to provide financing with no down payment can therefore be particularly useful when the Veteran wants to preserve liquidity. The VA confirms that most VA backed loans are made without a down payment. 

Higher Home Prices Increase the Dollar Difference

Consider three hypothetical Colorado purchase prices:

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The percentage stays the same.

But the dollar amount becomes increasingly significant.

A Veteran buying an $800,000 home must decide whether keeping $40,000 liquid is more valuable than reducing the mortgage by that amount.

Zero Down Does Not Mean Zero Cash Needed

One common misconception is:

"VA zero down means I need no money at closing."

That is incorrect.

The VA allows zero down financing, but there can still be closing costs.

The VA explains that closing costs can include items such as:

• Loan origination charges
• Discount points
• Credit report charges
• Appraisal fees
• Title insurance
• Recording fees
• Taxes
• Insurance
• Other applicable charges

On a purchase loan, the VA states that only the funding fee can be financed into the loan. Other fees and charges generally must be paid at closing unless covered through permitted seller credits or other applicable arrangements. 

Therefore:

Zero down ≠ zero cash required.

This distinction is particularly important when calculating the Veteran's post closing reserves.

Seller Credits Can Change the Equation

Seller credits can potentially help cover eligible closing costs.

The VA allows sellers or builders to provide credits toward certain buyer closing costs, while seller concessions are subject to VA limitations. The VA currently states that seller concessions are limited to no more than 4 percent of the home's reasonable value, while credits for ordinary closing costs are treated differently under VA rules. 

This means a Veteran should discuss:

Down payment

Closing costs

Seller credits

Funding fee

as separate components.

A zero down transaction may still be structured with significant seller assistance toward eligible costs.

VA Funding Fee Exemptions Can Change the Analysis

Some Veterans are exempt from the funding fee.

The VA states that Veterans receiving VA compensation for a service connected disability, among others who meet the applicable requirements, may not have to pay the funding fee. 

For an exempt Veteran, the financial advantage of a 5 percent down payment becomes narrower because there is no funding fee reduction to capture.

Using the $500,000 example:

Funding Fee Exempt

Zero down: $500,000 base loan

5 percent down: $475,000 base loan

The difference is simply:

$25,000

before considering interest and other loan costs.

For a non exempt Veteran, the 5 percent strategy also reduces the funding fee percentage.

That can materially change the comparison.

First Time vs Subsequent VA Use

The funding fee distinction becomes especially important for Veterans using the VA benefit again.

For purchase loans:

First use, less than 5 percent down: 2.15%

Subsequent use, less than 5 percent down: 3.30%

At 5 percent down:

First use: 1.50%

Subsequent use: 1.50%

These are the current rates listed by the VA for eligible non exempt borrowers. 

For a subsequent user, the difference between zero down and 5 percent down can therefore be considerably more meaningful.

Example: Subsequent VA User in Colorado

Consider:

Purchase price: $600,000

Zero Down

Base loan:

$600,000

Funding fee at 3.30%:

$19,800

Potential financed balance:

$619,800

Five Percent Down

Down payment:

$30,000

Base loan:

$570,000

Funding fee at 1.50%:

$8,550

Potential financed balance:

$578,550

Difference:

$41,250

That consists of:

$30,000 lower base loan

plus:

$11,250 lower funding fee

This illustrates why a 5 percent down payment can have a larger effect for some subsequent VA users.

What If You Put 5 Percent Down but Finance the Funding Fee?

The funding fee can be financed.

So the Veteran does not necessarily need to bring the funding fee in cash.

For example:

Base loan: $475,000

Funding fee: $7,125

Total financed balance: approximately $482,125

The Veteran still contributes:

$25,000 down

but the funding fee is incorporated into the mortgage.

The VA confirms that the funding fee may be paid at closing or financed into the loan. 

Does 5 Percent Down Lower the Interest Rate?

Not necessarily.

This is an important distinction.

The VA funding fee percentage changes at 5 percent down.

But the mortgage interest rate is determined by the lender and the specific loan transaction.

The VA itself does not determine most loan pricing details. The lender determines the interest rate, discount points, and other lender specific costs. 

Therefore, do not assume:

5 percent down = automatically lower interest rate.

Instead, compare actual lender offers.

Does 5 Percent Down Eliminate Mortgage Insurance?

VA loans generally do not require monthly private mortgage insurance.

That is true whether the Veteran makes:

0 percent down

or:

5 percent down

The VA specifically identifies the absence of monthly mortgage insurance as a major feature of the program. 

This is different from many conventional mortgages where a larger down payment can eliminate PMI.

For VA borrowers, the primary financial differences between zero and 5 percent down are more closely connected to:

Loan balance

Funding fee

Interest expense

Liquidity

Equity

rather than PMI elimination.

Zero Down vs 5 Percent Down: Long Term Perspective

The correct comparison should include at least five categories.

1. Upfront Cash

Zero down requires less cash.

2. Loan Balance

Five percent down creates a lower balance.

3. Funding Fee

Five percent down reduces the applicable funding fee for non exempt borrowers.

4. Interest Cost

A lower balance generally means less interest paid.

5. Liquidity

Zero down leaves more money available after closing.

The best choice depends on how the Veteran values these factors.

Scenario One: Zero Down May Make More Sense

A Veteran may favor zero down when:

• Cash reserves are limited
• The Veteran expects significant moving costs
• The property needs immediate improvements
• The Veteran wants a larger emergency fund
• The Veteran has other high priority financial goals
• The Veteran expects to refinance or sell relatively soon
• The cost of using cash is high
• The Veteran is funding fee exempt

For example:

Purchase price: $500,000

Available savings: $45,000

A 5 percent down payment would consume:

$25,000

leaving only $20,000 before other expenses.

Zero down could preserve substantially more liquidity.

Scenario Two: Five Percent Down May Make More Sense

A Veteran may favor 5 percent down when:

• Strong cash reserves remain after closing
• The Veteran expects to stay for many years
• Reducing interest expense is a major goal
• The Veteran wants lower monthly principal and interest
• The Veteran is not funding fee exempt
• The Veteran is a subsequent VA user
• The Veteran wants more initial equity
• The Veteran does not need the cash for other priorities

The key is that the down payment should not create financial strain.

Consider the Monthly Payment Difference

A lower loan balance generally creates a lower principal and interest payment.

Using the earlier hypothetical:

$500,000 loan at 6.50%

versus:

$475,000 loan at 6.50%

The approximate principal and interest payments are:

$3,160 vs $3,002

Difference:

Approximately $158 per month

That $158 could be used for:

• Savings
• Retirement
• Additional principal
• Household expenses
• Other investments

But the Veteran has already contributed $25,000 upfront.

The correct question is:

How long will it take for the monthly savings and lower interest expense to economically justify the $25,000 contribution?

Calculate the Effective Payback Period

A simple starting point is:

Down payment ÷ monthly payment reduction

Using the hypothetical:

$25,000 ÷ $158 ≈ 158 months

That's approximately:

13.2 years

But this is not a true investment return calculation.

Why?

Because the $25,000 is not simply "spent." It becomes property equity.

Also, the Veteran receives additional benefits from:

Lower interest expense

and:

Lower funding fee

Therefore, a proper comparison should consider the outstanding loan balance under both scenarios at the expected sale or refinance date.

Compare Loan Balances Over Time

Suppose both loans have the same interest rate.

After several years, the 5 percent down loan will generally have a lower outstanding balance.

That means the Veteran may owe less when selling or refinancing.

For example, if the Veteran sells after seven years:

Zero down: Higher remaining mortgage balance

5 percent down: Lower remaining mortgage balance

The difference in outstanding principal represents another economic benefit of the down payment.

But again, that needs to be compared against what the $25,000 could have earned or accomplished elsewhere.

What If Home Values Increase?

Suppose the $500,000 Colorado home appreciates to:

$600,000

The Veteran who made 5 percent down begins with more equity.

However, both Veterans benefit from the same appreciation on the property.

Zero down does not mean the Veteran receives no appreciation.

The difference is the amount of debt remaining against the property.

What If Home Values Decline?

Now suppose the property falls to:

$450,000

The 5 percent down Veteran has a lower mortgage balance.

That provides a larger equity cushion.

The zero down Veteran has less initial equity and therefore less protection against a decline in value.

This is one reason the down payment can have a risk management benefit.

However, real estate values can rise or fall, and no down payment strategy guarantees positive equity.

Colorado Property Taxes and HOA Costs Still Matter

The down payment decision should not be made independently of the property's complete housing cost.

A Colorado Veteran may have:

Principal and interest

Property taxes

Homeowners insurance

HOA dues

Special assessments

The down payment changes the mortgage portion of the payment.

It does not eliminate the other housing expenses.

For a condo or property in an HOA community, the recurring association fee can be especially important.

Don't Use Every Dollar Just to Lower the Loan

One of the most common mistakes is treating the down payment as automatically beneficial.

Imagine:

Savings: $50,000

5 percent down: $25,000

Closing and moving expenses: $10,000

Remaining cash:

$15,000

That may or may not be sufficient depending on the Veteran's circumstances.

A home purchase can create unexpected expenses during the first year.

Examples include:

• Repairs
• Appliances
• Landscaping
• Furniture
• Insurance deductibles
• HOA assessments
• Maintenance

Maintaining a reasonable cash reserve can be more valuable than reducing the mortgage by a relatively small amount.

The 5 Percent Threshold Is Strategically Important

The reason this comparison is especially interesting is that 5 percent is a VA funding fee breakpoint.

A Veteran does not need to put 10 percent down to receive the first reduced funding fee.

At:

5 percent down

the applicable funding fee drops to:

1.50%

for both first and subsequent use under the current schedule. At:

10 percent down

it falls further to:

1.25%. 

This means a Veteran considering a down payment may want to compare:

0%

5%

and potentially:

10%

rather than assuming every additional dollar produces the same benefit.

Why 5 Percent May Be a Sweet Spot for Some Veterans

From a funding fee perspective, 5 percent can create a meaningful reduction without requiring the much larger cash contribution associated with 10 percent.

Consider a:

$600,000 purchase

5 percent:

$30,000

10 percent:

$60,000

The additional $30,000 required to move from 5 percent to 10 percent only reduces the funding fee from:

1.50% to 1.25%

That is a relatively small percentage change compared with the additional cash commitment.

For some Veterans, therefore, 5 percent may be worth evaluating as a middle ground.

For others, zero down may still be preferable.

Zero Down Can Help Preserve Investment Capital

A Veteran with strong investment opportunities may prefer to keep cash outside the home.

For example, suppose a Veteran has:

$100,000 liquid

and could either:

Put $25,000 down

or:

Keep the $25,000 invested or available.

The Veteran should compare the expected benefit of reducing mortgage interest with the expected after tax return and risk of the alternative use.

This is not a guaranteed investment comparison.

Mortgage savings are relatively predictable.

Investment returns are not.

The Veteran should consider risk tolerance, liquidity, taxes, and investment objectives.

Long Term Cost Does Not Mean Interest Alone

When comparing zero down and 5 percent down, define "cost" correctly.

Total economic cost can include:

Interest paid

Funding fee

Closing costs

Opportunity cost of cash

Loan balance at sale

Liquidity value

Potential investment returns

Risk of insufficient reserves

A strategy with the lowest interest expense is not necessarily the strategy with the best overall financial outcome.

Colorado Veterans Should Consider Their Expected Holding Period

Holding period can significantly change the answer.

Short Ownership Period

If you expect to sell within two or three years, preserving cash may be more valuable.

The 5 percent down payment may not have enough time to produce significant interest savings.

Long Ownership Period

If you expect to stay for 10, 15, or 20 years, the lower mortgage balance can produce substantial interest savings.

The longer you hold the loan, the more important the cumulative interest difference becomes.

What About Refinancing Later?

Some Veterans expect to refinance when rates fall.

That possibility should not be treated as guaranteed.

Mortgage rates could remain high.

If a Veteran chooses zero down based on the assumption that they will refinance soon, the strategy could become less attractive if rates do not decline enough to justify refinancing.

A stronger approach is:

Choose a loan structure that works with today's known financial circumstances.

Treat future refinancing as a possibility, not a certainty.

A Practical Colorado Comparison

Consider a hypothetical:

Purchase price: $600,000

Interest rate: 6.50%

Term: 30 years

Option A: Zero Down

Base loan:

$600,000

First use funding fee:

$12,900

Potential financed balance:

$612,900

Option B: 5 Percent Down

Down payment:

$30,000

Base loan:

$570,000

Funding fee:

$8,550

Potential financed balance:

$578,550

Difference in potential financed balance:

$34,350

The Veteran contributes:

$30,000 cash

but begins with approximately:

$34,350 less financed debt

because of the combination of the smaller mortgage and lower funding fee.

That is the central mathematical benefit of the 5 percent strategy.

But What Does the $30,000 Cost You?

The Veteran must ask:

What happens to my financial position if I use $30,000 for the down payment?

If the Veteran still has:

$75,000 in reserves

the decision may be relatively comfortable.

If the Veteran has only:

$35,000 total savings

using $30,000 may leave inadequate liquidity.

The same loan can therefore produce completely different recommendations for different Veterans.

Questions Colorado Veterans Should Ask Their Lender

Before choosing zero down or 5 percent down, ask:

1. What is my exact VA funding fee?
2. Am I exempt from the funding fee?
3. Is this my first or subsequent VA use?
4. What would my loan amount be with zero down?
5. What would my loan amount be with 5 percent down?
6. How much would my funding fee change?
7. What would my monthly principal and interest payment be under each option?
8. What would my total interest cost be?
9. How much cash would remain after closing?
10. What closing costs must I pay out of pocket?
11. Are seller credits available?
12. What happens to my loan balance after five years?
13. What happens after 10 years?
14. How does my break even analysis change?
15. Would 10 percent down produce a meaningful additional benefit?
16. What interest rate and points apply to each option?
17. Does the down payment affect lender pricing?
18. What is the effect on my debt to income ratio?
19. How much emergency reserve should I retain?
20. What strategy best fits my expected time in the property?

These questions create a more complete comparison than simply asking for the lowest monthly payment.

Common Mistakes Colorado Veterans Should Avoid

Mistake 1: Assuming Zero Down Is Always Cheapest

Zero down minimizes upfront cash but produces a larger mortgage balance.

Mistake 2: Assuming 5 Percent Down Is Always Better

A lower balance can reduce interest, but using too much cash can weaken liquidity.

Mistake 3: Ignoring the Funding Fee

The funding fee changes at the 5 percent threshold for non exempt borrowers. 

Mistake 4: Forgetting Subsequent Use

The funding fee for subsequent use can be higher when the down payment is below 5 percent. (VA News)

Mistake 5: Using All Savings for the Down Payment

Homeownership requires cash reserves beyond the down payment.

Mistake 6: Comparing Only Monthly Payments

The loan balance and total interest matter.

Mistake 7: Assuming VA Requires 5 Percent Down

VA purchase loans can generally be made with no down payment when the borrower and transaction qualify. 

Mistake 8: Assuming Zero Down Means Zero Closing Costs

Other closing costs may still apply. 

Mistake 9: Ignoring the Opportunity Cost of Cash

Money used for the down payment cannot simultaneously serve as liquid savings or another financial resource.

Mistake 10: Choosing Based on a Generic Rule

The right down payment depends on the Veteran's specific financial position.

Zero Down vs 5 Percent Down Decision Framework

A simple framework can help.

Choose Zero Down for Further Evaluation If:

You need to preserve liquidity

Your cash reserves are limited

You expect significant post closing expenses

You are funding fee exempt

You expect a relatively short holding period

You have a strong reason to keep the cash available

Choose 5 Percent Down for Further Evaluation If:

You have substantial reserves after closing

You want to reduce the mortgage balance

You want a lower monthly principal and interest payment

You expect to hold the loan for many years

You are not funding fee exempt

You are a subsequent VA user

You want to reduce the applicable funding fee

Neither list is an automatic recommendation.

The final decision should come from the numbers.

Final Thoughts

For Colorado Veterans, the choice between zero down and 5 percent down is more nuanced than simply deciding whether to keep cash or reduce the mortgage.

With zero down, the Veteran can preserve more liquidity and still take advantage of the VA purchase loan's no down payment structure. VA backed loans also generally do not require monthly mortgage insurance. 

With 5 percent down, the Veteran reduces the mortgage balance and receives a lower VA funding fee percentage when the borrower is subject to the fee. Under the current VA schedule, the funding fee falls from 2.15 percent to 1.50 percent for first use and from 3.30 percent to 1.50 percent for subsequent use when the down payment reaches at least 5 percent. 

That can produce a meaningful difference in the amount financed.

But the down payment also consumes cash.

For a $500,000 home, 5 percent means:

$25,000

For a $700,000 home:

$35,000

For an $800,000 home:

$40,000

That money becomes home equity, but it is no longer liquid.

The strongest strategy is therefore to compare the two options across the full financial picture:

Upfront cash

Funding fee

Loan balance

Monthly payment

Total interest

Remaining cash reserves

Expected holding period

Property appreciation or depreciation risk

Alternative uses for the cash

A Veteran with strong reserves and a long ownership horizon may find that 5 percent down produces meaningful long term savings.

A Veteran who values liquidity, has limited reserves, or expects substantial near term expenses may find that zero down provides greater financial flexibility.

There is no universal answer.

The better question is:

How much does the 5 percent down payment save me, and is that savings worth giving up the liquidity of the cash?

That is the calculation Colorado Veterans should make before choosing their VA loan structure.

Frequently Asked Questions

Is zero down available with a VA loan in Colorado?

Yes. Eligible Veterans can generally use VA purchase financing without a down payment when the transaction and borrower satisfy applicable requirements. 

Does putting 5 percent down lower the VA funding fee?

Yes, for borrowers who are subject to the funding fee. The current purchase loan funding fee falls to 1.50 percent when the down payment reaches at least 5 percent. 

What is the VA funding fee with zero down?

For eligible non exempt borrowers using the benefit for the first time, the current funding fee is 2.15 percent when the down payment is less than 5 percent. For subsequent use, it is 3.30 percent. 

What is the VA funding fee with 5 percent down?

The current funding fee is 1.50 percent for both first and subsequent use when the down payment is at least 5 percent. 

Can I finance the VA funding fee?

Yes. The VA allows the funding fee to be financed into the loan or paid at closing. 

Do I need 5 percent down to avoid PMI?

No. VA loans generally do not require monthly private mortgage insurance. 

Is 5 percent down always better than zero down?

No. Five percent down reduces the loan balance and can reduce the funding fee, but it also uses cash that could otherwise remain available as reserves or for other financial purposes.

Does a 5 percent down payment lower my monthly payment?

Generally, yes, because the base mortgage balance is lower. The exact payment depends on the interest rate, term, funding fee financing, and other loan characteristics.

How much is 5 percent down on a $600,000 Colorado home?

Five percent of $600,000 is:

$30,000

This does not include closing costs or other cash requirements.

Does 5 percent down create more home equity?

Yes. Assuming the purchase price and loan structure remain otherwise unchanged, the down payment creates initial equity in the property.

Can a zero down VA loan have a higher long term interest cost?

Yes. Because the initial mortgage balance is larger, the Veteran generally pays more interest if all other loan terms remain the same.

Can a Veteran put 10 percent down instead?

Yes. The current VA funding fee for eligible non exempt borrowers falls to 1.25 percent when the down payment reaches at least 10 percent. 

Is 5 percent down a good middle ground?

It can be worth evaluating because it reaches the first major VA funding fee breakpoint without requiring the larger cash commitment associated with 10 percent down.

Does zero down mean I need no money at closing?

No. Other closing costs can still apply. On a purchase loan, the VA states that only the funding fee can generally be financed into the loan; other fees and charges generally must be paid at closing unless otherwise covered through permitted arrangements. 

Can the seller help with closing costs?

Yes. Seller or builder credits can cover certain buyer closing costs under applicable VA rules. 

Does the VA determine my mortgage interest rate?

No. The lender determines the interest rate, discount points, and many other loan pricing details. 

Should I use all my savings for a 5 percent down payment?

Generally, you should evaluate the effect on your post closing reserves before committing the cash. The right amount depends on your financial circumstances and expected expenses.

What is the biggest advantage of zero down?

The primary advantage is liquidity. You retain more cash instead of converting it into home equity at closing.

What is the biggest advantage of 5 percent down?

You start with a lower mortgage balance and, if subject to the funding fee, qualify for the lower 1.50 percent funding fee rate under the current VA purchase loan schedule. 

What should Colorado Veterans compare before deciding?

Compare the cash required, funding fee, loan balance, monthly payment, total interest, remaining reserves, and expected time in the home rather than focusing on one number.

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