No down payment does not mean no costs. Here is the honest line-by-line on a VA construction close.
The VA loan removes the down payment and monthly mortgage insurance. It does not remove closing costs — but it caps and limits them more tightly than any other loan program.
The funding fee
The funding fee replaces mortgage insurance and keeps the program self-funding. On a first-time zero-down purchase it is 2.15% of the loan amount, dropping if you make a down payment and rising on subsequent uses. It is almost always financed into the loan rather than paid in cash.
Who is exempt
- Veterans receiving VA compensation for a service-connected disability
- Veterans rated eligible for compensation but receiving retirement pay instead
- Surviving spouses of veterans who died in service or from a service-connected disability
- Active-duty Purple Heart recipients
Costs a veteran cannot be charged
The VA prohibits certain non-allowable fees — attorney fees for the lender's benefit, brokerage commissions, and prepayment penalties among them. Origination is capped at 1%. This is one reason VA closes are usually leaner than conventional ones.
No PMI, for the life of the loan
A conventional zero-or-low-down loan carries mortgage insurance until you reach roughly 20% equity. A VA loan never does. On a $450,000 build that difference is commonly $200–$300 a month from day one.
Build on your lot with $0 down
Legacy Custom Builders builds VA One-Time Close custom homes across Austin, Georgetown, Salado, Killeen, and the Hill Country.
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