The VA Loan Benefit Most Veterans Still Aren’t Using, and What It May Be Costing Them

We still meet veterans who know a VA home loan exists but assume it works much like any other mortgage. They expect to save for a large down payment, pay mortgage insurance, and wait another year or two before talking with a lender.

A 2026 survey commissioned by NewDay USA helps explain why. Of the 1,238 current and former service members surveyed, 63% knew about the VA home loan benefit. Yet 32% said they received little or no education about it during or after service. Only 32% knew a VA loan could be used with no down payment.

That gap can delay a good decision. A veteran may keep renting while saving a down payment the program does not require, or choose conventional financing without comparing the full monthly costs. Either loan can be right, but it should follow a fair comparison.

The Down Payment Changes the Buying Timeline

The same survey asked veteran non-homeowners about buying in 2026. With down payment and closing costs included, 21% said they were very or completely likely to buy. When those costs were removed, 40% said they would buy.

A VA loan does not remove every upfront expense but it can remove the largest one! The VA buyer’s guide says eligible borrowers generally can finance the full purchase price when the price does not exceed the appraised value. A lender can still have its own requirements, and a buyer with partial entitlement may face a different calculation.

On a $400,000 home, avoiding a 5% down payment keeps $20,000 available for moving, repairs, or an unexpected expense after closing.

In Chicagoland, those reserves can come in very handy depending on the property being purchased. An older bungalow may need electrical work after you move in. A suburban home can come with a property tax bill that changes the monthly budget. A condo buyer needs to review assessments, reserves, and possible special assessments. Getting into the home is only part of the decision.

What the VA Loan Can Change

Eligible buyers should understand four parts of the program before comparing loan options:

• No VA-required down payment. This generally applies when the price is at or below the appraised value. You can still put money down.

• No monthly private mortgage insurance. Conventional borrowers who put down less than 20% often pay PMI. VA-backed loans do not require it, so the monthly comparison should include every insurance charge and fee.

• Competitive terms from private lenders. A bank, credit union, or mortgage company sets the rate and many fees. Compare Loan Estimates from more than one lender.

• Military income can be handled differently. Basic Allowance for Housing (BAH) can count as qualifying income. VA guidance permits verified tax-free income to be grossed up for the debt-to-income calculation. The lender still reviews the full file.

We look beyond the maximum approval to principal, interest, property taxes, insurance, association dues, and a realistic repair allowance. A lender may approve a payment that leaves too little room for childcare, commuting, or the next PCS.

Zero Down Does Not Always Mean Zero Cash at Closing

VA buyers can still pay for an inspection, appraisal, title work, prepaid taxes and insurance, and other closing expenses. Earnest money may also be due soon after the contract is accepted, although it is generally credited back to the buyer on the closing statement.

The VA allows buyers and sellers to negotiate many closing costs. Seller credits can help, but they depend on the contract and may weaken an offer in a competitive neighborhood.

Illinois buyers may also have another option. IHDA’s Access Home program currently works with VA financing and offers eligible buyers assistance equal to 6% of the purchase price, up to $15,000. It is an interest-free deferred loan, not free money, and income, credit, occupancy, purchase-price, counseling, and buyer-contribution rules apply. Veterans can qualify for an exemption from the program’s first-time-buyer requirement. A participating lender should compare the assistance terms with other loan choices before you commit.

The Funding Fee Needs a Plain Explanation

Many VA borrowers pay a one-time funding fee. For a first purchase with less than 5% down, the current fee is 2.15% of the loan amount. It can usually be financed into the loan. Some veterans, service members, and surviving spouses are exempt, including many borrowers who receive VA compensation for a service-connected disability.

Beginning in 2026, qualified mortgage insurance premiums became deductible again, and the VA says eligible borrowers may deduct the funding fee. Your return and the applicable rules determine the result, so ask a qualified tax professional.

Financing the fee reduces cash due at closing but increases the loan balance and interest paid over time. Ask the lender to show both choices in dollars to see if it would make sense in your specific scenario.

A Useful VA Loan Conversation Should Be Specific

A good first conversation covers your Certificate of Eligibility, remaining entitlement, income, debts, expected time in the home, and cash reserves, while active-duty buyers should also discuss BAH and PCS timing and returning borrowers should review whether their entitlement can be restored or reused. A VA multifamily purchase requires more work because occupancy, rental income, reserves, property condition, landlord responsibilities, and the numbers for each unit all need careful review. Dorazio Real Estate closes many of these transactions every year, and there is no team better equipped to guide the purchase or answer the questions that come with it.

We are veteran-led, and that background shapes how we prepare clients. Dorazio Real Estate is a Mil-Estate affiliate and Chicagoland’s only Mil-Estate affiliated real estate team. We help military and civilian clients moving into Chicagoland, and our referral network helps people relocating elsewhere.

The goal is a clean comparison among VA, conventional, and any assistance program that fits. You should see the cash and monthly-payment differences before choosing.

If you have been waiting because you think a large down payment is required, we are available to talk through the numbers and connect you with a lender who knows VA financing.