Can the VA Home Loan's 0% down-payment end up causing financial harm?

I guess I have come late to the discussion, but I can shed lots of light on this subject. The VA home loan is a benefit that you earned as a result of your service and sacrifice to our nation. There is absolutely no "catch" to this incredible benefit. The VA appraisal process is also another layer of protection for the home buyer as the home must meet what is called minimum property requirements of standards not necessarily required on conventional home loans. On conventional loans, you must put down a minimum payment of 20% in order to avoid mortgage insurance on the home you are purchasing. VA home loans require no down payment and your interest rate will average .50% lower than the conventional counterpart. Of course, you can always opt to put money down on a VA home loan to lower your mortgage payment, but that is entirely your call based upon your circumstance. Many of my VA home loan clients also accelerate their principal pay down by arranging for accelerated pay off schedules, thus saving thousands in interest payments over the life of their loan. VA home loans are not complicated as some might suggest and can close like any conventional home loan in 30 days or less.

The ideal part of the 0% down is that it will not be required in order to purchase a home, something that is great for someone that can afford the slightly higher month to month payments coming from a larger total, but cannot afford to scrap together 10k or 20k for a down payment.

The more you can put on a down payment (and the more principle only payments you make) helps you to pay less over the long run.

It's not really a trap or a predatory loan practice as it allows more flex in the ability and options when buying a home. The traps come from the 20% interest loans with no money down required. This at least gives you a lower rate and gives you more flexibility in being able to obtain the loan or not.

On a traditional loan, if you don’t put down 20%, you also pay PMI, mortgage insurance. You pay that until you reach 20% of the loan repaid.

The VA loan is good because even though you can do no money down, you don’t have to pay PMI.

It’s still a good idea to put some money down, start with some equity. But it’s definitely not a trap. Just because they’ll loan you money doesn’t mean you have to take it. Be fiscally responsible, look at your debt to income ratio, how much house you need, etc.

I bought a house on active duty with a traditional 30 yr fixed. I bought houses in retirement with a VA loan and a traditional 30 yr fixed. It all just depends on the current situation, and your current needs, wants, and financial abilities.

The VA loan is very straightforward, and it’s definitely not a trap. If you get in over your head, it’ll likely be your own fault.