Qualified veterans are eligible for mortgages that are guaranteed by the Department of Veterans Affairs (VA), and these VA mortgages can be a very good deal. One of the most attractive benefits is the fact that VA mortgages don’t require borrowers to make a down payment. However, if you’re an eligible veteran and you’ve got the funds for a down payment, should you make one?

Benefits of a down payment

There are reasons for veterans to make a down payment for their VA mortgages:

  • Lower funding fee. VA mortgages have a funding fee, which helps finance the VA mortgage program. The fee can be financed with the mortgage. The fee for an eligible first-time homebuyer is 2.15 percent of the loan amount if he or she makes no down payment, and it’s 3.3 percent for non-first-time VA homebuyers. With a 5 percent down payment, the fee drops to 1.5 percent, and a 10 percent down payment lowers it to 1.25 percent.
  • Lower monthly payment. Of course, a down payment means your monthly payment will be lower because you’re not borrowing as much money.
  • More home equity. A down payment means you’ve got more equity in your home, which can improve your financial picture. For example, it can make it easier to sell the home if you need to move.

Keeping your cash

Even if you do have cash available, you might find better uses for it than making a down payment. For example, you can save it for emergencies, use it to renovate your new home, or pay off higher-interest rate debts, like credit cards. If you’re thinking about a VA mortgage, contact Embrace Home Loans at 407-733-6425. We’ll work with you to help you decide whether or not a down payment is right for you.