VA Loans in Tampa Bay: What the Benefit Is Actually Worth
Tampa Bay has MacDill Air Force Base, a large veteran population, and a steady flow of people arriving on orders. The VA loan benefit gets used here more than in most markets, and it's still the least understood of the common loan types.
Most of what people know about it is the headline. The cost sits in a single fee, and a lot of Tampa Bay buyers don't pay it.
No down payment, and no mortgage insurance
Two things make a VA loan different from everything else on the table.
No down payment is required, as long as the sale price doesn't exceed the home's appraised value. You can still put money down, and there's a reason you might, covered below.
It has to be your primary residence. A VA purchase loan is for a home you're going to live in. It isn't a route to a second home or a rental, and that catches people who assumed the benefit was broader than it is.
There's no mortgage insurance. No PMI, and no MIP either. On a conventional loan with less than 20 percent down, or on any FHA loan regardless of down payment, mortgage insurance is a monthly charge that protects the lender if you stop paying. It buys the borrower nothing. A VA loan simply doesn't have it, and over a few years that difference adds up to more than most buyers expect.
The VA funding fee
In place of monthly mortgage insurance, the VA charges a one-time funding fee. It's a percentage of the loan, and it depends on whether you've used the benefit before and how much you put down. The rates below are the VA's own, and it publishes the current schedule.
| Situation | Funding fee |
|---|---|
| First use, nothing down | 2.15% of the loan |
| First use, 5% down | 1.5% |
| First use, 10% or more down | 1.25% |
| Used it before, nothing down | 3.3% |
On a $400,000 loan with nothing down on a first use, the fee comes to about $8,600.
Two practical points about it. The funding fee is the only closing cost you're allowed to roll into the loan on a purchase, so it doesn't have to come out of your pocket at closing. And a down payment reduces it, which gives you an actual reason to consider putting 5 percent down even though nothing requires you to.
Who pays no funding fee at all
A large number of Tampa Bay buyers are exempt from the funding fee entirely, and plenty of them don't know it.
You're exempt if any of these apply, and the VA's own list is the authority on it:
- You're receiving VA compensation for a service-connected disability.
- You're eligible for that compensation but receiving retirement pay or active-duty pay instead.
- You're a surviving spouse receiving Dependency and Indemnity Compensation.
- You have a proposed or memorandum rating before your loan closes.
- You're an active-duty member who received a Purple Heart by your closing date.
Raise it with your lender at the first conversation rather than later. An exemption changes the number on every estimate you're comparing, and comparing one lender's quote with the fee against another's without it tells you nothing useful.
Watch the full breakdown
Read video transcript
I think the headliner for the VA loan is zero down. And there are ways to structure the deal so that the seller helps the buyer actually walk into the property with very little money out of pocket. There are a lot of people who maybe know that they might be eligible for a VA loan, but it's been a while since they've used one and may not realize how powerful the VA loan really can be.
A VA loan is a financing option for homebuyers that are eligible military service members and veterans, where the VA actually backs a portion of the loan. And because they do that, it lowers the risk to lenders and allows for the homebuyer some pretty interesting and unique benefits. One of which being a 0% down payment. They can come to the table with zero down on their home.
With conventional loans, if you put less than 20% down you are required to have mortgage insurance, because until you have at least 20% down you really have very little skin in the game and you're asking for hundreds of thousands of dollars to borrow. So they require mortgage insurance. The VA loan is unique, however, because even with zero percent down, no mortgage insurance is required, which can save hundreds of dollars a month on your mortgage payment. More buying power with your monthly payment, nothing down, and incredibly competitive rates.
If you want to find information on the VA loan, you can go to VA.gov and see the ins and outs and all the rules of it. If you want to know if you're eligible, request your COE. You can do it online.
One of the nuances of the VA loan is that it is required to be your primary residence. The VA loan is only for primary purchases.
Let's talk briefly about how this process goes. If I'm a buyer and I'm buying a house and I'm going to use a VA loan, what should I expect? The first thing that you should do is get pre-approved, and hopefully do this a couple of weeks out before you're actually on the scene hunting for houses. I also open up the idea of getting pre-approved to people even if they're not ready to, or don't know if they're ready yet, to buy a house. Because buying a house is a really big deal. Getting pre-approved is a phone call, it's a conversation. We're looking at your situation, what your application looks like, what your documents look like, and preparing in advance to make sure that when you're ready to move you are in a strong position to do so.
So the buyer gets pre-approved, they go shop for a home, they find one they love and make an agreement on it, they get the contract signed, and then they need to put earnest money up. Earnest money is a good faith deposit. You're saying, hey seller, in exchange for you taking the house off the market, and our contract being laid out that we're closing in 30 days, that's exactly the time that I need to finish getting financing and finish getting inspections done on the home so I know that it's in good shape. I'm going to put this amount of money over with the title company. The title company holds it, and then it's credited to their side of the transaction at closing.
Up next we're going to do a home inspection. The VA requires the pest inspection be done, and that they get a clean copy of a pest inspection report. They call it a wood destroying organisms report, the WDO, so the VA requires a clean WDO to close. Your insurance company is going to require a 4-point and a wind mitigation report in order to give you any discounts. And then the rest of the home inspection is the buyer's. This is the buyer's opportunity to see what is right and wrong with the property. The report is about 30 pages long, and it should have pictures illustrating each section. You should get a full breakdown of the plumbing and electrical systems in the house, and the roof should be in good condition.
After the inspection is done, the house will be surveyed and an appraiser will come out. The VA appraisers are a little different. They're looking to make sure that there is sufficient collateral in the home, that it's worth itself. Also, because it's a VA loan and the VA is backing a portion of the loan, they want to make sure that they are protecting veterans as well. So if they're saying, hey veteran, you can put 0% down, they don't want you walking into a home and closing on a new home that you're going to be underwater on from day one. They want to make sure that you're in a safe and secure home that has sufficient collateral. And then if there's anything that needs to be done in order for the service member to move in, the appraiser can put that on the appraisal.
So if the roof is missing a shingle, the buyer could allow that in the home inspection and proceed with the deal. But if the appraiser says that it needs a new shingle, it needs that before it closes. So when the VA appraiser comes over, if there are any repairs that need to be made, they'll make the appraisal subject to those repairs and then come back out and do a reinspection. The whole thing is set up to protect the service members. It really is a good product.
So you get through the appraisal and the survey, and then it's closing day, and this is where everybody settles up. The title company has been working with buyer and seller and agents and insurance companies, and everything gets brought to one sheet of paper.
Even if you're putting zero down, you still have your closing costs that you'll need to pay for. So you should expect to pay those out of pocket, often anywhere from 3 to 5% of the purchase price. But we have worked with a lot of veterans before to try to reduce that number to as close to zero as possible, one of which being asking the seller.
It's easier to think of it overarchingly as two different categories. When you're buying a home, you have two parts to what you might be paying out of pocket. There's the down payment portion and there's the closing cost portion. So with the VA loan, it's nice because that down payment portion you could put as little as zero down, which wipes that part out of the equation, but you're still left with the closing cost portion.
So buying a house, there's a lot of things happening behind the scenes. This is where the seller credit comes in. So if we're trying to actually walk into a property with nothing down on a VA loan, we do it by using that seller credit at the closing table.
So if you are thinking about using a VA loan, and you have your lender and your agent on the same page, and you can connect with a seller that's willing to play ball, you really can set up a closing situation where you walk in with very little money out of pocket.
If you're looking for more information on the VA loan, you can find the source material on VA.gov, and you can go in there and find out exactly who qualifies, on what properties, and everything else. And then if you want to start a conversation with Andi, which I recommend, just pick up the phone and call. You can call, text or email. I'm happy to break it down and walk you through exactly what your scenario might look like.
The short version for anyone who would rather read than watch. The VA backs a portion of the loan, which lowers the lender's risk and is what makes the benefits possible: no down payment, no mortgage insurance even at zero down, and competitive rates. The home has to be your primary residence. Start by getting pre-approved, ideally a few weeks before you're looking, and it's worth doing even if you aren't sure you're ready. From there the sequence runs contract, earnest money held by the title company and credited back to you at closing, inspections, then the appraisal and survey, then closing day. Even with nothing down you still owe closing costs, so the way buyers get in with almost nothing out of pocket is a seller credit negotiated into the contract.
How buyers close with almost nothing out of pocket
Split what you'd pay into two buckets: the down payment and the closing costs. The VA benefit empties the first one. It does nothing to the second, and closing costs on a Tampa Bay purchase commonly run 3 to 5 percent of the price.
So the second bucket is where the work happens. A seller can contribute up to 4 percent of the home's reasonable value toward your closing costs, which is a negotiated term like any other and comes down to how the offer is written. The funding fee can be financed into the loan rather than paid at the table. Between those two, a buyer with an agent and a lender working the same contract can get very close to nothing out of pocket.
Nothing about that is unusual or a trick. It's the benefit working the way it was designed to.
A Tampa Bay VA loan that closed in 26 days
Read video transcript
So we got a call on July 3rd from a veteran client that was wanting to see a house. And what better way to ring in Independence Day than to run out and show this thing. The house had been under contract twice before.
We were able to figure out exactly what the buyer wanted and exactly what the sellers wanted and put this deal together. We wound up with a VA loan on this property. The contract was inked on July 5th, we just closed today, July 31st, which is 26 days later.
With the help of our friend Andi Menaul at Goodwin Mortgage Group, we were able to set this VA loan up so that we got a seller credit. The buyer's cash to close amount was reduced by $6,000, and then he also got all the furniture in the house.
So this was a great example of having the right team members in place, putting together a good transaction. The sellers are happy, the buyers are happy, and we got it done in record time.
This was a fantastic deal for our buyers. Unfortunately, the sellers were kind of a victim of a tough market here. They had overpriced to start with, walked their price down a couple of times, and then in and out of contract twice. So by the time we came along, we were able to capitalize on the listing price that was already under the comps around it, and just made a very smooth transaction for the buyers to step right into this house.
A veteran client called us on July 3rd to see a house that had already been under contract twice. The contract was signed on July 5th and it closed on July 31st, 26 days later. Working with lender Andi Menaul of Goodwin Mortgage Group, the deal was structured with a seller credit that cut the buyer's cash to close by $6,000, and the furniture stayed with the house.
What the VA checks that a conventional lender doesn't
Two extra steps sit in a VA purchase, and both are there to protect the buyer rather than the lender.
A clean wood-destroying organism report. Every Florida county sits in the VA's termite inspection zone, so a VA purchase here needs a WDO inspection on form NPMA-33 before the loan can close. The report is generally good for 90 days. Since June 2022 either the buyer or the seller may pay for it, so it's one more line that can go into the seller credit conversation.
An appraisal that can require repairs. A VA appraiser is doing two jobs: confirming the home is worth what you're paying, and confirming it's safe and sound for the veteran moving into it. That second job has teeth. If the appraiser finds something, the appraisal comes back subject to those repairs, and the repairs have to be done and re-inspected before closing. A missing shingle you might have let go after a home inspection becomes a condition of the loan once the appraiser writes it up.
Neither step is a reason to avoid the benefit. Both are reasons to build a little more time into the contract than a conventional buyer would.
What to have ready
Your Certificate of Eligibility. You can request the COE yourself online at VA.gov. It's what a lender checks your entitlement against. If you've used the benefit before and haven't restored it, that's where any limit on this purchase will show up, so it's worth pulling early rather than at contract.
A lender who writes VA loans regularly. The rules on appraisals, allowable costs, and what a seller can and can't pay are specific, and a lender who does a handful of these a year will move faster than one who doesn't.
A realistic number. How much house can I afford in Tampa Bay? walks through the difference between what a lender approves and what's comfortable to carry. If you're looking in one of Tampa Bay's newer master-planned communities, read CDD fees too, because that assessment lands on the property tax bill and changes the monthly number.
Talk it through with us
Every purchase is different, and the VA benefit has more moving parts than most. Reach out and we'll walk through what it looks like for your situation, connect you with a lender who writes these regularly, and help you write an offer that uses the seller contribution properly.
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Open the calculator on its own pageFAQs
Do I really need no down payment?
Correct, as long as the sale price doesn't exceed the appraised value. Putting money down is optional, and it lowers the funding fee.
Is there mortgage insurance on a VA loan?
No. There's no PMI and no MIP. That's the monthly difference against a conventional loan with less than 20 percent down, or against any FHA loan.
What does the funding fee cost?
2.15 percent of the loan on a first purchase with nothing down, 1.5 percent with 5 percent down, 1.25 percent with 10 percent or more, and 3.3 percent if you've used the benefit before with nothing down. It's a one-time charge and it can be financed into the loan.
I have a service-connected disability rating. Do I pay it?
Most likely not. Tell your lender at the first conversation, because it changes every estimate you'll be comparing.
Can the seller pay my closing costs?
Up to 4 percent of the home's reasonable value. That, along with financing the funding fee, is how VA buyers close with very little out of pocket.
