Should I put money down on a VA loan in Arizona?
Mike Certo ·
The signature feature of VA loans is $0 down. But sometimes putting money down is the smarter financial move. Here's how AZ veterans should think about it.
The funding fee tier math (when down payment saves real money)
The VA funding fee scales inversely with down payment percentage:
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% to less than 10% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
On a $475K AZ home: - $0 down (first use): funding fee = $10,213 - 5% down ($23,750): funding fee = $6,769 — saves $3,444 - 10% down ($47,500): funding fee = $5,344 — saves $4,869
If you have the cash AND the funding fee math matters to you, crossing the 5% threshold is the biggest funding-fee savings tier.
But if you have 10%+ disability rating, funding fee is waived entirely. This entire calculation goes away — $0 down is the default best play for disabled vets.
Scenario 1: You SHOULD put money down
A. You're entering at the funding fee tier boundary
If you have ~$25K-$50K saved + want to avoid the highest funding fee tier, putting 5% or 10% down captures the funding fee tier discount. On $475K loan with first use, that's $3-5K in savings.
B. You want a lower monthly payment for cash flow
Some buyers prioritize lower monthly. Every $20K of down payment reduces your monthly P&I by ~$125 (at 6.50% / 30yr). If your retirement income is tight, this matters.
C. You're planning to sell within 3-5 years
If AZ market dips and you sell within 3 years of buying, having put 10-20% down means you're not underwater. $0-down VA buyers in declining markets can be locked in until they recoup the funding fee + closing costs.
D. The mortgage payment fits your cash-flow comfort zone better with down payment
Pure psychological/cash-flow factor. If $2,800/month at $0-down feels uncomfortable but $2,500/month at 10% down feels right, the peace of mind has real value.
Scenario 2: You should KEEP $0 down
A. You have a 10%+ disability rating
Funding fee is waived. The main "cost" of $0 down disappears. Combined with no monthly PMI (always), VA at $0 down is essentially free leverage.
B. You want to preserve cash for moving + furniture + reserves
PCS moves cost $5K-$15K out of pocket beyond closing. New homes need furniture + landscaping + start-up costs. Keeping cash for those vs putting more down can be smarter.
C. You're investing the difference in higher-return assets
If you can earn more than 6.50% on the cash (Roth contributions, employer 401k match, paying down higher-rate debt), don't put it into a 6.50% mortgage as down payment.
D. You're in an appreciating AZ market with confidence in the buy
Phoenix, Tucson, and parts of Yuma have appreciated steadily. $0 down + appreciation = stronger ROI on the cash you didn't put in. If you're confident in the market, $0 down works.
What about partial down payment (5% or 10%)?
The "middle path" — putting 5% or 10% down — captures the funding fee discount tier without depleting all cash reserves. For many AZ veterans in the $475K-$700K price range, this is the optimal play.
Example: AZ E-7 retiring + $50K cash
Option A — $0 down: - Loan: $475K + $10,213 funding fee = $485,213 - Monthly P&I (rate-dependent — talk to Mike for a current quote) - Cash remaining: $50K (kept for reserves)
Option B — 10% down ($47,500): - Loan: $427,500 + $5,344 funding fee = $432,844 - Monthly P&I (rate-dependent — talk to Mike for a current quote) - Cash remaining: $2,500
Option B saves $333/month + $4,869 in funding fee — but ties up $47,500 cash. If that cash isn't earning more than the saved mortgage interest over the holding period, Option B wins financially.
How to decide
Honest question to ask yourself: what would I do with the cash if I DIDN'T put it down?
If the answer is "leave it in checking earning nothing," put it down. If the answer is "max my Roth IRA + employer 401k match," keep the $0 down. If the answer is "pay off 18% credit card debt," definitely keep $0 down + pay off the cards first.
I run both scenarios for every AZ VA buyer who has any cash to put down. The right answer is rarely automatic. Call me at (480) 296-6513.