VA Loan Funding Fee: Everything you need to know
Estimated Reading Time: 5 Minutes
In today’s market, VA home loans are amongst the most attractive mortgage types out there. If you’re a qualifying veteran you can enjoy very low-interest rates and never have to pay mortgage insurance.
These are very generous benefits, but it is a common misconception that taxpayer dollars support the VA Loan program.
That’s not true.
The program is self-sustaining, and it pays for itself through VA funding fees.
How VA Funding Fees Work
VA funding fees are included in most VA loans, and they are paid back into the program to make it available for future veterans.
The two most asked questions I get from service members applying for VA loans are these:
How are these fees calculated?
VA home loans require an upfront, one-time payment called the VA funding fee. The fee is a percentage based on the loan amount. VA home loan applicants can pay all or part of the fee in cash, or wrap it into the loan amount to reduce out-of-pocket expenses.
Who pays VA funding fees?
Generally, all Veterans using the VA Home Loan Guaranty benefit must pay a funding fee. This reduces the loan’s cost to taxpayers considering that a VA loan requires no down payment and has no monthly mortgage insurance.
After those, the next most asked question I get is:
Are VA funding fees are due in cash up front, or if they can be financed?
Veterans do not have to pay the VA funding fees in cash. In any case, it’s important to understand how VA funding fees work.
These fees do not change the fact that VA home loans are predominantly the most economical loans for buying or refinancing a home.
How to calculate a VA funding fee
The amount that your funding fee will be is based on your service, the amount of cash you can put down, and if you’ve ever received a VA loan in the past.
Most veterans will pay a 2.15 percent funding fee when buying a home. This is equal to $2,150 for every $100,000 borrowed.
This fee amount applies to the most popular type of veteran and loan. Those being regular military veterans who do not make any down payments.
Veterans who use a VA loan more than once will pay the higher VA funding fee of 3.3 percent unless they put down at least 5 percent. With a higher down payment, the funding fee will match first-time use rates
Members of the military reserves or National Guard veterans pay a 3.3% funding fee on subsequent VA loans. However, once their down payments reach or exceed 5%, the fees start to go down.
The breakdown is below.
Some vets are exempt from paying funding fees.
If you’re a veteran who is receiving VA compensation for a service-related disability, be sure to share this with your lender. Some vets are exempt from paying any funding fee at all when getting a VA home loan.
Do you have more questions about the VA Home Loan Process, or are you ready to start the process?
Talk with a VALoanSpot Loan Specialist today at 800.537.2050, or fill out our Get A Quote form and a specialist will contact you shortly.
Bobby Atkisson is a seasoned mortgage professional who provides high quality financial services to military members and veterans. With over 14 years experience in the lending and financial industry, his mission is to provide high quality mortgage programs with the most competitive interest rates. For expert advice and guidance on VA Home Loans and Refinance, contact Bobby today at 800-537-2050.