Buying a Texas Home With Zero Down
The single most powerful feature of the VA loan is the ability to purchase a home with zero down payment. In Texas, where median home prices range from $280,000 in Killeen to over $500,000 in Austin proper, this benefit can save veterans anywhere from $8,000 to $100,000 in upfront cash.
But how exactly does zero down work? What costs do you still pay? And are there any situations where putting money down actually makes sense? This guide answers all of it.
How Zero Down Payment Works on a VA Loan
With a conventional mortgage, lenders require a down payment because it reduces their risk — if you default, the equity cushion protects them. The VA loan eliminates this risk differently: the federal government guarantees 25% of the loan amount to the lender. This guarantee replaces the down payment as the lender's protection.
Result: you bring zero dollars to the table for a down payment, and the lender is still protected.
Who Qualifies for Zero Down in Texas
To buy with zero down, you need full VA entitlement. Full entitlement means:
- You have never used your VA loan benefit before, OR
- You previously used a VA loan, paid it off in full, and had your entitlement restored
If you currently have an active VA loan on another property, you may have remaining entitlement — which may or may not be enough for zero down depending on the loan amount and county limits.
What Zero Down Does NOT Mean
Zero down payment does not mean zero cost to close. Here are the costs you will still need to cover or negotiate:
VA Funding Fee
Most veterans pay a one-time funding fee to sustain the VA loan program:
- First use, zero down: 2.15% of the loan amount
- Subsequent use, zero down: 3.30% of the loan amount
The good news: the funding fee can be rolled into the loan so you pay nothing out of pocket at closing. And it is waived entirely for veterans with a VA disability rating of any percentage.
Closing Costs
Typical closing costs on a Texas VA loan include:
- VA appraisal: $600–$900
- Title insurance: $1,000–$2,000
- Escrow/settlement fee: $500–$800
- Prepaid property taxes and homeowners insurance: $2,000–$4,000
- Lender origination fee: up to 1% of the loan (VA-regulated)
Total closing costs: approximately $5,000–$10,000 on a $350,000 purchase.
Strategies to reduce or eliminate closing costs:
- Negotiate for the seller to pay up to 4% of the purchase price in concessions
- Ask your lender about lender credits in exchange for a slightly higher rate
- In new construction, builders often cover closing costs for VA buyers
Real Numbers: Zero Down in Texas Markets
| Market | Median Price | Zero Down Saves | Monthly Payment (est. 6.5%) |
|---|---|---|---|
| Killeen / Harker Heights | $265,000 | $53,000 (20% conventional) | ~$1,675/mo |
| Hutto / Pflugerville | $330,000 | $66,000 | ~$2,085/mo |
| Round Rock | $400,000 | $80,000 | ~$2,528/mo |
| Georgetown | $450,000 | $90,000 | ~$2,844/mo |
| San Antonio suburbs | $290,000 | $58,000 | ~$1,834/mo |
Payments include principal and interest only. Add property taxes, insurance, and HOA if applicable.
Should You Ever Put Money Down on a VA Loan?
For most veterans, zero down is the right move. But there are two scenarios where a down payment makes sense:
1. Reduce the Funding Fee
Putting 5% down reduces the first-use funding fee from 2.15% to 1.50%. On a $400,000 loan, that saves $2,600 — but you spent $20,000 in cash. The math rarely favors this.
2. Subsequent Use With High Funding Fee
On a second VA loan use with zero down, the funding fee jumps to 3.30% — $13,200 on a $400,000 loan. Putting 5% down reduces it to 1.50% ($6,000). Here the savings may justify the down payment, especially if you plan to hold the home long-term.
Frequently Asked Questions
Yes. With full entitlement, there is no loan limit and no geographic restriction within Texas. Zero down is available in Austin, San Antonio, Killeen, Round Rock, Georgetown, Kyle, Buda, Hutto, Temple, and all surrounding areas.
Not necessarily. You start with zero equity, but equity builds through mortgage payments and appreciation. Texas real estate, particularly the Central Texas corridor, has historically appreciated well, building equity relatively quickly for VA borrowers.
Yes. This is standard practice. On a $350,000 purchase, the 2.15% funding fee of $7,525 is added to the loan for a total of $357,525 — so you still bring zero down payment to closing.
