Two Surprises with VA Zero Down Financing

When buying a home zero down VA financing, you still need money to purchase the home.

As crazy as that sounds, it’s true, and the goal of this article is to explain why that’s the case and how ensure you don’t have surprises.

You will need money for two things when have no down payment with VA financing – the first is for something called an “Earnest Money Deposit” and the second is called “Closing costs.”  Let’s go over each of these, in turn.

Earnest money deposit:  When you make an offer, which is essentially telling the seller “I would like to buy this home,”  a deposit is included with your offer. Actually, you won’t be able to make an offer without also including a deposit. 

Please focus on the word, “deposit,” because at closing, the deposit is applied to the funds needed to purchase the home, or if you don’t need funds to purchase the home, you actually get your deposit back.  You just need money for a deposit so that an offer can be made and to get the process started. 

Closing Costs:  The second thing you will need money for is called “closing costs.”  These are costs associated with the transaction or costs required to make the transaction happen.    

The best way to describe closing costs is a simple example - let’s say you were buying a $75 gift for a friend online.   In order to do so, you will need the $75.00 to make the purchase, but also, you would also have to pay shipping / handling and sales tax, in addition to the $75.00 purchase price.   Essentially the sales tax and the shipping and handling are closing costs. 

Closing costs are not a trivial topic in a real estate transaction – in certain jurisdictions, such can be a rather large number. The best way to have a realistic forecast for closing costs is to talk to your lender.  Of note, a local lender can often give the most accurate forecast, as they are familiar with the nuances of that particular area’s real estate fees and expenses. 

Ending Summary: When buying a home zero down/VA financing, there are two things you will need money for.   

The first is called an EMD or earnest money deposit, and talk to your realtor just to understand how much money you’ll need so that you will have the ability to make an offer on any given home. 

The second is called closing costs, which are the costs needed over and above the purchase price when buying a home. Talk to your lender, preferably a local lender, so you’ll have a good estimate of money needed for closing costs, thereby avoiding nasty surprises. 

If you’re looking in Maryland, Virginia, or D.C., you can always reach out to me, using the contact button of my website - www.ThreeEasySteps.me 

I hope you are having a good day and best of luck with your home search!