VA Loans and Down Payments
December 08, 2011 
Bruce Reichstein 
The Department of Veterans Affairs insures VA home loans with a no-down payment option. Some borrowers using the VA loan program choose a no money down option to save money on the front end of the loan, but others choose to make a down payment to reduce the amount of the required VA Loan Funding Fee, or to reduce the amount of the loan overall.
There’s another reason a down payment may be needed–when the borrower has the home appraised and the asking price differs from the appraised value of the property. In these cases the borrower has three choices–walk away from the deal, try to renegotiate the sales price, or agree to pay the difference between the asking price and the appraised value of the home.
The VA loan program does not authorize loans for an amount higher than the appraised value except when the loan includes energy efficient improvements, closing costs or other allowed financing of certain expenses, or other add-ons to the loan amount. In other words, the extras included in the loan amount, plus the appraised value of the property are what’s allowable. If the asking price is higher than the appraised price, the borrower who chooses to pay the difference must do so in cash.
VA rules allow a VA loan applicant to borrow funds (using VA approved sources) to make a down payment, except in cases where the price exceeds the appraised value of the home.
The VA Lender’s Handbook specifically states in Chapter 8 Section G, “The downpayment may come from the veteran’s own resources or borrowed funds. Except, if the purchase price exceeds the reasonable value of the property, the difference between the purchase price and the reasonable value must be paid by the veteran in cash without borrowing.”
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We filed bankrupcy in 2010 due to medical bills. Both of us are on Social Security Disability. How does this affect our eligiabilty?
Does the VA loan money to remodel a home to better fit our physical limitations?
Hi Charles, thanks for your question. The VA does offer a program for disabled veterans–you should explore the VA Specially Adapted Housing Grant programs. More information is at the VA official site at http://www.benefits.va.gov/homeloans/sah.asp. When it comes to bankruptcy, VA requirements state there is a two year minimum waiting period between bankruptcy and a new VA home loan, though some lenders may require more waiting time.
That said, the VA Specially Adapted Housing Grant is NOT a loan–you may be eligible for this grant program (provided you qualify for it under the program requirements) in spite of having a bankruptcy–again, the Specially Adapted Housing program isn’t a loan but a grant program. This program is specifically designed to help veterans renovate a home to make it more accessible.