Some VA home loans offer zero down payment. Why don't more veterans know about them?

When Charles Carrington left the Marine Corps after eight years of service, he was gripped by uncertainty and a general lack of direction.

“You go from having all this structure, where everything is planned and organized to nothing,” he says. “It’s just a very big culture shock.”

The last thing on his mind at the time was the relative ease with which he could become a homeowner with the VA home loan program, one of the many Veterans Affairs benefits he would be eligible for.

"You just want to get out and be done with it,” said Carrington, 39. “You're not worried about the bigger picture, you're not worried about understanding all of the benefits.”

It took Carrington almost 13 years to realize he could buy a home with no money down with a VA loan.

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Only 3 in 10 veterans know they can use VA loans to buy a home with a zero down payment, according to a new national survey of Veterans and active duty service members by Realtor.com.

The ability to purchase a home without the burden of a down payment and attractive interest rates can be a game changer in today’s hypercompetitive real estate market, marked by sky-high prices.

Over the last year, the average down payment percentage for VA loans stood at 2.7%, whereas the average down payment percent for conforming loans was 19%, according to the report.

What's the difference between a VA home loan and a regular home loan?

The VA home loan program was created in 1944, part of the original Servicemen's Readjustment Act, better known as the GI Bill of Rights. Since its inception, it has helped more than 24 million veterans become homeowners.

A VA loan requires no private mortgage insurance, even though the buyer doesn’t have to make a down payment. Other loans require mortgage insurance premiums for any down payment of less than 20% of the home’s value. The loans are also forgiving when it comes to credit requirements and offer attractive rates compared to the open market.

Still, only around 24% of qualified homeowners are using their VA loan benefits. A lack of awareness among veterans and a general perception in the market that VA loans take longer to close, could be factors in its lack of popularity, say experts.

“The VA doesn't set a credit score benchmark. There's a lot of discretion for lenders and that's on purpose,” says Chris Birk, vice president of mortgage insight at Veterans United Home Loans, the largest VA lender in the US. "The way the VA historically has looked at it is this is meant to be this is a job benefit for those who've served our country. It was created to help level the playing field."

Birk says military service has helped narrow the homeownership gap for communities of color, many of whom face structural barriers and a lack of generational wealth. Black veterans have higher homeownership rates than Black civilians, and the difference in homeownership rates between white and Black veterans is considerably smaller than the gap between white and Black civilians, according to a review of five years’ worth of Census data (from 2017-2022) by Veterans United.

The homeownership rate gap between Black and white Veterans was 16.6 percentage points in 2021, compared to a nearly 30-percentage point gap between Black and white civilians, the analysis found.

After Carrington returned home to Tennessee, he started working as a manager of an e-sports company and living in his childhood home. When his father died five years ago, the home was in a state of disrepair.

“There was no hot water, no heat, no AC, so it was not really ideal living conditions for a while, for the past few years,” he says. “But I was hesitant to put money into fixing that because the house was in such bad condition. But it was a place that you could live and there was no rent, there's no mortgage, none of that.”

During a birthday trip to Pensacola, Florida, earlier this year, Carrington says he began considering a move there.

That’s when a Facebook post by one of his Marine Corps friends about a contest to win a home organized by Veterans United popped up on his page.

He didn’t win the contest, but he got in touch with the company to explore his options.

“It seemed like a far-fetched idea, I’ve never bought a house or anything like that and all I was hearing was how terrible housing market is,” he says. “I didn’t know where to begin.”

How does a VA home loan work?

He says he was pleasantly surprised by the process.

“They (Veterans United) said, 'Here's your realtor, this is your preapproved amount.' I just had to give them my military service record details and then they did all of the legwork,” he says.

He was surprised that he could get a loan with zero down payment and also get an interest rate of 6.3% when the general rates were above 7%.

He closed a few weeks ago on his 1,500 square-foot three-bedroom two-bath house in October for $350,000. The home also has a garage and a fenced in backyard and is 1 ½ miles from the beach.

“It feels really to the point to where I don't really think it's fully sunk in,” he says. "I'll just stand here and turn the water on and like, just enjoy the fact that it's hot water. It’s really easy to take that kind of stuff for granted. So I'm definitely enjoying it.”

One thing he wishes the military would do better: thoroughly explain the benefits to young service members before they are discharged.

“It shouldn’t be all crammed into the last couple of weeks,” he says. “If I would've understood the process as well as I do now after going through it, it would've definitely changed the timeline that things played out.”

Swapna Venugopal Ramaswamy is the housing and economy reporter for USA TODAY. Follow her on Twitter @SwapnaVenugopal