VA Loan Costs, Fees & Rates: is it really "Zero Down?"

The VA loan is one of the strongest homebuying tools out there for Veterans and Active Duty buyers. Let’s break down why and go over everything it requires, and offers you as a member of the military. 

1) The VA Loan is Zero Percent Down

Zero down is what it sounds like: you are not required to make a down payment.

However, that doesn’t mean you won’t need to bring any money to the table at closing — you’ll most likely still have some Out of Pocket Costs. 

So what DO you still pay for? 

When you’re buying a house with a VA loan, typical upfront costs include:

• Earnest Money Deposit (EMD): This is your “good faith” deposit, which usually gets credited back to you at closing (or applied to closing costs).
• Home Inspection: Not required by the VA, but strongly recommended. As a rule of thumb, you can estimate this to be around $400-$600.
• VA Appraisal: This is required. VA sets appraisal fee maximums by region/state.

2) The VA Funding Fee (one-time)

Instead of monthly PMI, VA loans usually include a one-time VA funding fee (which you may be exempt from — more on that in a second). Most buyers finance it into the loan rather than paying it out of pocket at closing. 

2025 VA purchase funding fee rates (based on down payment + use):

First use

• Less than 5% down: 2.15%
• 5% or more: 1.5%
• 10% or more: 1.25%

After first use

• Less than 5% down: 3.3%
• 5% or more: 1.5%
• 10% or more: 1.25%

Funding fee exemption

You don’t pay the VA funding fee if you meet certain criteria — like receiving VA compensation for a service-connected disability, plus other qualifying situations listed by the VA. 

Can the seller pay for my closing costs?

The answer is often yes. The VA allows sellers and builders to credit buyers for closing costs, and VA specifically limits “seller concessions” to 4% of the home’s reasonable value (per the VA Notice of Value). 

Translation: a seller may be able to help cover certain items (sometimes even things like prepaids or the funding fee), but it needs to be structured correctly to stay within VA guidelines. 

The “hidden” approval factor many people miss: residual income

Most people obsess over DTI (debt-to-income ratio). VA underwriting cares a lot about residual income — meaning, after your new mortgage payment and monthly debts, how much money is left for real life. 

Residual income amounts in Michigan

For loan amounts $80,000 and above, the VA residual income guidelines for the Midwest region, including Michigan, are as follows: