You've earned a home loan benefit that may let you buy without a down payment — and in Colorado's market, that can be the difference between owning and continuing to rent. But zero down does not mean zero cash to close: the funding fee, closing costs, prepaids, and earnest money still add up before you get the keys.
For veterans, active-duty service members, and qualifying surviving spouses buying in Denver, Littleton, Aurora, or the surrounding communities, the real question isn't whether you can avoid a down payment. It's how much money you need in hand to actually complete the purchase — and how to plan your budget around both the closing and the years that follow.
The verdict: who should use a VA loan in Colorado
A zero-down VA loan is almost always the strongest option for an eligible borrower who wants to preserve savings — but only when you plan for the closing costs that no down-payment program eliminates. Fee-exempt borrowers (those with a service-connected disability rating) get the best deal, since they skip the funding fee entirely. For non-exempt borrowers, putting 5% down can cut the funding-fee percentage and shrink your starting loan balance, even if you don't have to.
If you're buying in the Denver metro area and want to keep cash available for moving, repairs, and emergencies, the VA loan wins for most eligible households. If you're buying an investment property you won't occupy, it's not the right tool at all.
Decide by your situation, not the marketing
A VA loan looks identical on paper for every borrower, but the actual cost to close depends on a few personal factors. Use this quick matrix to see which case is yours.
Buyer concern | How it plays out |
|---|---|
Best for | Eligible borrowers who want no down payment and no monthly mortgage insurance, and who can cover closing costs from savings |
Main limitation | Zero down doesn't mean zero cash to close — funding fees, prepaids, and earnest money still come out of pocket |
Down payment | Not required at all; optional 5% or 10% payments can shrink the funding-fee percentage for non-exempt buyers |
Funding fee | 2.15% for first use with less than 5% down; 3.3% after first use — unless you're fee-exempt, which removes it entirely |
Monthly insurance | None — VA loans require no private mortgage insurance (PMI), unlike conventional and FHA loans |
Closing costs | Still your responsibility; seller credits can offset them, capped at 4% of reasonable value for certain concessions |
Borrowing power | Full entitlement means no county loan limit, but income, credit, and the property still decide your approval |
Use the table as a starting point, then get a written estimate from a lender who reviews your specific eligibility and entitlement.
What $0 down actually means
Your down payment is the portion of the purchase price you pay rather than finance. Your closing expenses are a separate bucket, and they are where a zero-down deal still costs you cash.
Depending on the transaction, closing costs may include eligible lender charges, title and settlement services, recording charges, prepaid interest, homeowners insurance, and initial escrow deposits. Then there are expenses you might pay before settlement, such as inspections or an earnest-money deposit. Ask your lender for a written estimate that separates each of these items.
The estimate you should request
Category | What to establish |
|---|---|
Down payment | Whether any is required for this loan |
Funding fee | Whether you're exempt and, if not, how it will be paid |
Closing costs and prepaids | Estimated charges and available credits |
Money needed before closing | Timing of deposits and upfront expenses |
Remaining cash to close | Amount still due after deposits and credits |
Savings after the purchase | Cash available for moving, repairs, and emergencies |
A low amount due on closing day is helpful, but it doesn't mean you spent nothing along the way. Your complete purchase budget — not just the amount wired at closing — is the number that matters.
A worked example: $500 due at closing
Consider a hypothetical zero-down purchase in Colorado at a $550,000 price:
Item | Illustrative amount |
|---|---|
Home purchase price | $550,000 |
Down payment | $0 |
Closing costs, prepaids, and escrows | $13,500 |
Eligible seller credit actually applied | −$10,000 |
Earnest money already deposited | −$3,000 |
Remaining cash to close | $500 |
This assumes sufficient entitlement, an appraisal supporting the price, lender approval, and a funding-fee exemption or a separately financed funding fee. The buyer has already contributed $3,000 in earnest money and still owes $500 — and separately paid inspections would add to the total outlay.
The seller credit also needs to be negotiated, allowable, and supported by actual eligible charges. These figures are examples, not a quote or a statement of typical Colorado closing costs.
What is the VA funding fee?
Unless you're exempt, borrowers generally pay a one-time VA funding fee on a VA-backed purchase loan. This fee helps offset the cost of the program to taxpayers, which is part of how the program avoids requiring a down payment or monthly mortgage insurance — the VA funding fee ranges from 0.5%–3.3% depending on the loan type, loan amount, down payment, and whether it's a first use of the benefit.
For standard VA-backed purchase loans, the published fee schedule is:
Down payment | First use | Subsequent use |
|---|---|---|
Less than 5% | 2.15% | 3.30% |
At least 5% but less than 10% | 1.50% | 1.50% |
At least 10% | 1.25% | 1.25% |
These percentages apply to the base loan amount, not the purchase price. On a $550,000 purchase with zero down, a non-exempt first-use borrower would owe an $11,825 funding fee — financing it produces a $561,825 loan balance. Financing the fee preserves upfront cash but increases debt and the interest charged over time.
Who is exempt from the funding fee?
The biggest lever on your cash-to-close number is whether you're fee-exempt. VA identifies several exemption categories, including borrowers receiving VA compensation for a service-connected disability, qualifying surviving spouses receiving Dependency and Indemnity Compensation, service members with a qualifying proposed or memorandum rating before closing, and active-duty service members with evidence of a Purple Heart.
Since 2021, more than half of Veterans who obtained a VA-guaranteed home loan were exempt from paying the funding fee — so this is not a niche edge case. Have your lender verify your status early, because it changes the math substantially.
For the hypothetical $550,000 first-use purchase, an exemption removes the $11,825 funding fee entirely. That's the difference between financing an extra $11,825 of debt or starting with a $550,000 loan balance.
Should you put money down even when it's optional?
Zero down preserves liquidity, but a voluntary down payment reduces how much you borrow and — for non-exempt buyers — can drop the funding-fee percentage at the 5% and 10% thresholds. Consider a hypothetical $550,000 first-use purchase:
Comparison | Zero down | 5% down |
|---|---|---|
Down payment | $0 | $27,500 |
Base loan amount | $550,000 | $522,500 |
Funding-fee percentage | 2.15% | 1.50% |
Funding fee | $11,825 | $7,837.50 |
Loan balance if fee is financed | $561,825 | $530,337.50 |
The 5%-down option uses $27,500 more toward the price and reduces the funding fee by $3,987.50, leaving $31,487.50 less mortgage debt. That does not make it the better choice for every household — consider what remains available for repairs, relocation, and emergencies.
If you're fee-exempt, the fee-reduction advantage doesn't apply. Compare actual lender pricing and your remaining cash before deciding.
How much can you borrow with a VA loan in Colorado?
Full entitlement does not mean unlimited purchasing power. VA does not impose a county loan limit for borrowers with full entitlement, but the lender still evaluates income, debts, credit, assets, and the property.
If your entitlement is tied up in another VA loan or you haven't fully restored previously used entitlement, county limits and remaining entitlement can affect the amount available without a down payment. For borrowers without full entitlement who don't make a down payment, lenders often limit the total loan amount to four times the remaining entitlement — in other words, four times the amount of VA's guaranty.
Ask the lender to review your Certificate of Eligibility and calculate your situation rather than relying on an online county-limit chart. You can use the VA benefit more than once; whether another purchase requires cash down depends on the entitlement and financing analysis.
What credit score and income do VA loans require?
VA does not set a universal minimum credit score, although lenders may establish their own requirements. That's one reason an answer from one lender may not describe every available option — and it doesn't mean a different lender can automatically approve the loan.
Debt-to-income ratio (DTI) compares your qualifying monthly debt obligations with your qualifying gross monthly income. VA underwriting also evaluates residual income: the calculated amount remaining for family support after specified obligations, taxes, and allowances. Residual guidelines vary with household size, region, and loan amount — this is not simply gross income minus your mortgage.
VA's 41% DTI benchmark is a guide rather than an automatic cutoff. Higher ratios require more scrutiny and support; strong residual income can matter. Passing either calculation does not by itself guarantee approval.
Can a seller pay your VA closing costs?
Yes. Seller assistance can help reduce your out-of-pocket expenses. However, VA distinguishes ordinary buyer closing costs from a separate category called seller concessions, and certain concessions are limited to 4% of the property's established reasonable value. Ordinary buyer closing costs and normal discount points are not included in that 4% calculation.
Examples of concessions include paying the funding fee or certain borrower debts. On a property with a $550,000 reasonable value, 4% equals $22,000 — but that is not an automatic entitlement to $22,000, and it is not a universal cap on all seller assistance. Have the lender classify the specific items before your agent negotiates the credit.
What if the VA appraisal is lower than the purchase price?
Suppose you agree to pay $550,000, but the established value comes in at $535,000. That $15,000 difference does not disappear just because the loan offers zero down.
Possible paths include renegotiating the price, requesting a supported Reconsideration of Value, or deciding whether to contribute the difference. Your contract protections also matter — VA instructs buyers to include its escape clause. An appraisal checks value and basic property requirements, but it is not a substitute for an independent home inspection.
Can you buy a duplex or use a VA loan for rental property?
VA purchase financing can be used for eligible properties with up to four units when you will occupy the property as your home. That may allow you to live in one unit and rent out the others — but it does not make VA financing a loan for a purely investment property you don't intend to occupy.
Before relying on rental income, ask about qualifying-income documentation, reserves, property eligibility, and lender requirements.
Build a Colorado payment budget that includes the whole home
For a purchase in Denver, Littleton, Arvada, Wheat Ridge, Aurora, or a surrounding community, request a property-specific estimate. A complete budget includes mortgage principal and interest, property taxes, homeowners insurance, HOA dues and applicable assessments, utilities, and a maintenance allowance.
No monthly mortgage insurance does not eliminate the other costs of ownership. Compare two actual listings using their own expense information — the home with the lower purchase price may not have the lower total monthly cost. Also test your budget against changes: a higher insurance renewal, an appliance replacement, or a period with reduced household income.
Questions to ask before making an offer
Has my eligibility and available entitlement been verified?
Am I exempt from the funding fee?
What will I need before closing and at settlement?
How much seller assistance can I actually use?
What changes if I put 5% down?
What is the full monthly housing expense?
How much cash remains after moving?
What happens if the appraisal is below the price?
Ask for written comparisons with consistent assumptions. When comparing lenders, account for points, fees, credits, loan balance, and payment together. VA notes that private lenders offer different rates and fees, so comparing offers remains useful even when using the same benefit.
1Does a VA loan mean I need no money at all?
A zero-down loan may still involve upfront expenses and closing costs. Obtain a complete budget showing credits, deposits, and the funding-fee treatment.
2Is the VA funding fee monthly mortgage insurance?
No. The funding fee is generally a one-time charge unless exempt. VA-backed purchase loans do not require monthly PMI or FHA-style MIP.
3Do I have to be a first-time homebuyer?
No. Eligibility is based on the VA benefit requirements, and the benefit can be reused subject to entitlement and approval.
4Is a Certificate of Eligibility a mortgage approval?
It documents benefit eligibility. The lender must separately approve the loan and property.
5Is a VA loan always the best option?
It deserves a careful comparison when you are eligible. Compare actual offers, exemption status, upfront cash, and expected ownership plans before choosing.
Use your VA benefit with a plan
Your benefit may help you become a homeowner while preserving savings. The next step is understanding how it works with your budget and the property you want — and building the plan before you make an offer.
I help Colorado buyers compare their financing options, understand cash to close, and see the tradeoffs before committing to an offer. Ask a question or connect through my Voce profile for practical Colorado mortgage guidance.
Plan your Colorado VA loan with a local expert
Ask a question or connect for practical Colorado mortgage guidance.
Connect with meCameron Becnel | The Easy Mortgage Guy | NMLS #2660097
Educational and lending disclaimer: This article is provided for general educational and informational purposes only. It is not a loan approval, pre-approval, commitment, offer, guarantee, or promise to lend, and does not constitute individualized financial, legal, tax, or investment advice. Examples are hypothetical and are not rate quotes or representations of typical transaction costs. VA eligibility does not guarantee loan approval. Zero-down financing is subject to available entitlement, property value, lender requirements, and borrower qualification. Funding fees, exemptions, seller concessions, loan terms, documentation, and underwriting requirements may change and vary by transaction. All loans are subject to application, verification of income, assets and credit, property eligibility and valuation, applicable program requirements, and final underwriting approval. Cameron Becnel and The Easy Mortgage Guy are not affiliated with or endorsed by the U.S. Department of Veterans Affairs or any government agency. Cameron Becnel, NMLS #2660097.
No comments yet. Be the first to share your thoughts!