A Game Changer for Veterans: Nearly All Home Sales Using VA Loans Have Down Payments Below 10% By Realtor.com

As we gather to salute our hardworking heroes this Veterans Day, a research initiative from Realtor.com® reveals just how vital Veterans Affairs (VA) loans are in helping military families achieve homeownership.

One of the biggest obstacles to buying a home—aside from home prices and mortgage rates—is coming up with the down payment. These days, Americans are cash-strapped, and many don’t have thousands of dollars in their savings accounts. For the nation’s homebuying heroes, however, not having a large down payment—or any down payment—is an obstacle.

Nearly 90% of homes purchased with VA loans over the past year required down payments below 10%—a stark difference from conventional loans, which often prefer closer to 20% down though that figure is not mandatory.

Realtor.com data reveals that 74.5% of VA loans issued in the past year had a 0% down payment, while over 85% involved a down payment of less than 10%.

“In contrast, the share of lower down payment-conforming loan home sales was less than half,” says Realtor.com economist Jiaya Xu in a recent analysis, which shows that only about 40% of buyers secured a home with less than 10% down.

With median home prices hitting $424,950 in October, a lower down payment offered by flexible VA loans is a game changer for Veterans and active-duty service members.

The down payment struggle

Many homebuyers find it challenging to scrimp and save yet never quite amass enough cash to reach the 20% benchmark.

Indeed almost 32% of first-time homebuyers say saving for a down payment is the most difficult part of buying a home, according to a recent National Association of Realtors study.

A further look at renters reveals that 85% are saving for a home, but 44% are saving $500 or less per month, meaning it would take nearly seven years to save for a 10% down payment on a median-priced U.S. home, according to a recent Realtor.com survey.

“Fortunately, the zero down payment option of VA loans helps alleviate the emotional stress and uncertainty of saving for a down payment, which can be discouraging over time,” says Xu. “It also allows buyers to preserve their savings for other important expenses, such as moving costs, home improvements, or emergency funds, while still making homeownership a reality.”

So while buyers may start out with less home equity, zero or low down-payment options allow them to secure current prices, leverage mortgage debt, and potentially build wealth over time through home value appreciation and equity growth.

Monthly savings with VA Loans

VA loans save borrowers money every month, thanks to lower average mortgage rates and the lack of mortgage insurance.

With conventional loans, a buyer who puts down less than 20% typically has to get private mortgage insurance (PMI). This fee adds 1% to 2% to the loan amount, which can add up to a lot.

But VA borrowers don’t have to get mortgage insurance, even if they put down absolutely nothing.

All in all, a first-time buyer using a no-down-payment VA loan could save around $69 per month compared to a similar conforming loan, adding up to over $800 annually, Xu says.

The Realtor.com analysis compares key factors such as down payment requirements, credit score considerations, and mortgage rates, contrasting VA loans with conforming loans issued in the past 12 months.

Military buyers’ credit score advantage

Along with a down payment, credit scores can make or break a home purchase as many conventional loans require a score of 660 or above.

VA loans, however, make homeownership possible for those with less-than-perfect credit.

According to the Realtor.com analysis, 23.2% of VA borrowers last year had credit scores between 580 and 669, a stark contrast to just 4.5% of conforming loan borrowers.

This trend is particularly significant for military buyers with lower credit scores. These homebuyers may also struggle to make the large down payments that conforming loans often require.

“For every credit score grouping, recent VA borrowers had lower down payments than conforming loan borrowers,” says Xu.

As the Realtor.com research highlights, low down payments, flexible credit requirements, and significant monthly savings make VA loans a lifeline for Veterans and active-duty service members navigating today’s challenging housing market.

The Realtor.com Mission Zero campaign, in partnership with Veterans United, provides information on Veteran homebuying benefits, including zero down loans.

"Call Eli Torres at (832) 430-2107, for your home buying and selling needs."

Source: www.realtor.com