If you do go through with the purchase, then the 3.5% deposit that you made will be applied towards whatever down payment and/or closing costs you may have.
In this case, you are applying for a VA loan. I presume that you are seeking 100% financing. In addition, I further presume the VA funding fee will be rolled into the mortgage. That leaves closing costs. What happens is the 3.5% down payment will be applied towards your closing costs. If your closing costs amount to less than the 3.5% down payment, then what is not spent will be returned to you at the settlement table. If the seller is paying your closing costs (or a portion of it), then the seller's proceeds will first be applied to your closing costs before you make any contributions. Again, whatever funds remain from the initial 3.5% deposit you made will be returned to you at settlement.
Hope this helps.