VA Loans
VA Loans in Arizona: What Zero Down Really Costs
No down payment is not the same as no money. Here is what an Arizona VA buyer actually brings to the closing table.
A VA loan with full entitlement means no down payment and no monthly mortgage insurance. It does not mean you show up to closing empty-handed. The cash a VA buyer needs comes from three places instead – earnest money, closing costs and prepaids, and the one-time VA funding fee – and every one of them can be reduced or eliminated if you plan the file early.
Key takeaways
- Zero down removes the down payment, not the closing costs. Budget for earnest money, title and escrow fees, the appraisal, and prepaid taxes and insurance.
- The VA funding fee on a first-use purchase with less than 5% down is 2.15% of the loan amount, and it can usually be financed into the loan rather than paid in cash.
- Roughly a third of VA borrowers pay no funding fee at all – disability compensation, Purple Heart, and surviving-spouse status are the common exemptions.
- The VA does not cap what a seller or builder can credit toward your loan closing costs, which is the single most useful thing to negotiate in an East Valley contract.
What does zero down actually mean on a VA loan?
It means the VA guaranty stands in for the down payment. On a conventional loan, your cash down is what protects the lender if the file goes bad; on a VA loan, the Department of Veterans Affairs backs a portion of the loan instead, so the lender does not need that cash cushion from you. With full entitlement there is no VA-imposed loan limit either – that cap came off in 2020 under the Blue Water Navy Vietnam Veterans Act. What you can borrow is a function of your income, credit, and the lender’s guidelines, not a county ceiling.
What zero down does not do is waive the ordinary costs of buying a house in Arizona. Title and escrow still charge. The appraiser still bills. The county still wants property taxes prepaid into escrow, and the insurer still wants the first year of hazard coverage. Those line items exist on every loan type, VA included.
VA loans with The Starks Team
We are an independent brokerage, so a VA scenario gets shopped to the lenders whose overlays actually fit it instead of forced through one lender’s rulebook. Ken has been originating for 24 years, and VA files are a large part of that work.
The VA funding fee: what it costs in 2026
The funding fee is a one-time charge that keeps the VA loan program self-sustaining – it is the reason there is no monthly mortgage insurance on a VA loan. The VA publishes the rates, and the current schedule has been in effect since April 7, 2023. The fee is calculated on the loan amount, not the purchase price.
| Down payment | First use | After first use |
|---|---|---|
| Less than 5% | 2.15% | 3.3% |
| 5% or more | 1.5% | 1.5% |
| 10% or more | 1.25% | 1.25% |
Source: VA funding fee rate charts, effective April 7, 2023. Rates for VA-backed purchase and construction loans for veterans, active-duty service members, and Guard and Reserve members. Interest Rate Reduction Refinancing Loans carry a 0.5% fee; loan assumptions are also 0.5%.
Put numbers on it. A $450,000 purchase with nothing down and no exemption carries a first-use funding fee of $9,675. Financed into the loan, the balance becomes $459,675 and the fee never touches your checking account – which is exactly what most Arizona VA buyers do. Figures are illustrative and subject to change; your own loan amount and fee are confirmed on your Loan Estimate.
Notice the jump from 2.15% to 3.3% on a second use with less than 5% down. On a repeat VA purchase, putting 5% down cuts the fee to 1.5% – on a $450,000 loan that is roughly $8,100 less in fee. Whether that trade is worth the cash out of pocket depends on your reserves and your plans for the house, and it is a five-minute conversation before you write an offer, not after.
Who is exempt from the VA funding fee?
A large share of VA borrowers pay no funding fee whatsoever. You are exempt if you fall into any of these categories:
- You receive VA disability compensation for a service-connected disability.
- You are entitled to that compensation but receive retirement or active-duty pay instead.
- You are an active-duty service member who received a Purple Heart on or before the closing date.
- You are the un-remarried surviving spouse of a veteran who died in service or from a service-connected disability.
Exempt status shows on your Certificate of Eligibility, which we can usually pull electronically in minutes. It is worth checking even if you think you know the answer – a rating that came through after a previous VA purchase changes your fee status, and we have seen buyers pay a fee they did not owe because nobody re-pulled the COE. If a fee was collected in error, it can be refunded.
Zero down is the headline. The closing costs are the part that actually decides whether a veteran can write an offer this month.– Ken Starks, independent mortgage broker
What a VA buyer actually brings to closing
Here is the honest list, in the order you will encounter it.
- Earnest moneyDue within days of contract acceptance and held by the title company. It is not an extra cost – it credits back to you at closing – but it is real cash out of your account early, and it is the number most first-time VA buyers forget to plan for.
- The appraisalVA appraisals are ordered through the VA’s portal and include Minimum Property Requirements – health and safety checks a conventional appraisal would not flag. Usually paid up front.
- Closing costsTitle insurance, escrow and recording fees, credit report, origination. These vary by lender and by title company, which is one reason it pays to compare Loan Estimates rather than a quoted rate alone.
- Prepaids and escrowsThe first year of hazard insurance plus several months of taxes and insurance deposited into your escrow account. On an Arizona purchase this is frequently the largest line on the page after the funding fee.
- The funding fee2.15% on a typical first-use zero-down purchase – unless you are exempt, and unless you finance it into the loan, which most buyers do.
The VA does not limit what a home seller or builder can credit toward your loan closing costs. Separately, seller concessions – things of value added to the deal, such as paying your funding fee or prepaying your hazard insurance – are capped at 4% of the home’s reasonable value. On a listing that has been sitting in Gilbert or Queen Creek, asking for a closing-cost credit is often a more productive ask than a price reduction, because it converts directly into cash you no longer have to bring.
VA vs. FHA vs. conventional at the closing table
If you are VA-eligible you still have options, and VA is not automatically the cheapest path for every file. The comparison that matters is total cost over how long you actually keep the loan, not the down payment alone.
| At closing | VA | FHA | Conventional |
|---|---|---|---|
| Minimum down payment | $0 with full entitlement | 3.5% | 3% and up |
| Upfront fee | Funding fee, 2.15% first use (financeable, waived if exempt) | Upfront MIP (financeable) | None |
| Monthly mortgage insurance | None | Yes | PMI until you reach 80% LTV |
| Loan limit | None with full entitlement | County FHA limit | Conforming limit |
| Occupancy | Primary residence (1-4 units, you occupy one) | Primary residence | Primary, second home, or investment |
The pattern we see most often: a veteran with an exemption and a seller credit closes for very little cash, and the absence of monthly mortgage insurance compounds in their favor every month afterward. A veteran with 10% saved and a strong score sometimes finds conventional competitive once the funding fee is weighed against PMI that eventually drops off. Both are worth running side by side before you commit – our mortgage calculator is a reasonable starting point, and a real comparison takes us about a day.
Key terms
- Certificate of Eligibility (COE)
- The VA document confirming your eligibility, your available entitlement, and whether you are exempt from the funding fee.
- Full entitlement
- Your VA benefit is unused, or was used and restored after payoff and sale. With full entitlement there is no VA-imposed loan limit.
- VA funding fee
- A one-time fee charged as a percentage of the loan amount, which funds the program in place of monthly mortgage insurance. Financeable; waived for exempt borrowers.
- Minimum Property Requirements (MPRs)
- Health and safety standards a home must meet on a VA appraisal – working systems, sound roof, safe water, no active pest damage.
- Residual income
- The income left after your mortgage, debts, taxes, and estimated maintenance and utilities. VA underwriting looks at this alongside debt-to-income, and it is why some veterans qualify on VA when they would not elsewhere.
- Seller concession
- Anything of value the seller adds to the transaction at no cost to the buyer, such as paying the funding fee. Capped at 4% of the home’s reasonable value.
Frequently asked questions
Does a VA loan really require no money at all to buy a house?
No. A VA loan with full entitlement requires no down payment, but you still have earnest money, closing costs, prepaid taxes and insurance, and the VA funding fee unless you are exempt. Zero down means no down payment – not zero cash. Seller or lender credits, an exemption, and financing the funding fee into the loan are the three levers that shrink what you bring to the table.
How much is the VA funding fee in 2026?
For a VA-backed purchase, the fee is 2.15% of the loan amount on a first use with less than 5% down, 1.5% with 5% or more down, and 1.25% with 10% or more down. On a subsequent use with less than 5% down it rises to 3.3%. These rates have been in effect since April 7, 2023 and are published by the VA; the fee is calculated on the loan amount, not the purchase price.
Who is exempt from the VA funding fee?
Veterans receiving VA disability compensation for a service-connected disability, veterans entitled to that compensation but receiving retirement or active-duty pay instead, active-duty service members who received a Purple Heart on or before the closing date, and un-remarried surviving spouses of veterans who died in service or from a service-connected disability. Exempt status is confirmed on your Certificate of Eligibility.
Can the seller pay closing costs on a VA loan in Arizona?
Yes. The VA does not limit a seller’s or builder’s credit toward the buyer’s loan closing costs, and separately allows seller concessions of up to 4% of the home’s reasonable value. In a market where a home has sat, asking for a credit instead of a price cut is often the more useful negotiation.
Is there a loan limit on a VA loan in Arizona?
With full entitlement there is no VA-imposed loan limit – that cap was removed by the Blue Water Navy Vietnam Veterans Act in 2020. What you can borrow is set by your income, credit, and lender guidelines. If part of your entitlement is tied up in an existing VA loan, county limits come back into play and a down payment may be needed to cover the gap.
Find out what your VA purchase would actually cost
Send us your Certificate of Eligibility – or let us pull it – and we will put real numbers on the funding fee, the closing costs, and the cash you would need to bring.