What is the VA Funding Fee?
VA financing is a great option for eligible Veterans, service members and surviving spouses who are hoping to become homeowners or refinance their existing home. VA home loans offer low- or no- down payment options with no monthly mortgage insurance and come with competitive interest rates. They also have flexible qualifying criteria for being approved for the loan when compared to other products, such as a conventional or jumbo home loans.
And while there are many pros that come with the VA loan, they do require that a fee be added to the loan amount. It is called the VA Funding Fee and is a percentage of the overall loan amount. The amount can vary depending on a few factors, so it is important that homebuyers understand how it works and what they can expect to pay.
Because the VA loan is guaranteed by the Department of Veterans Affairs, the lender is partially protected from loss because the government insures the loan if the borrower defaults. The fee ensures that the program remains sustainable and helps with costs related to the VA home loan program.
*Exemptions may apply. Final exemption eligibility is up to the VA. Source: www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/#va-funding-fee-rate-charts
As you can see from the chart above, those using a VA loan can qualify for a lower funding fee by paying a larger down payment. As of late 2021, qualifying homebuyers who put down less than 5% when buying a home for the first time will pay 2.3% of the total loan amount and 3.6% on subsequent loans.
If you aren't sure if you qualify for VA financing, speaking to a Certainty Loan Officer is a great place to start. Get pre-qualified today to take full advantage of your well-deserved VA benefits.
1Source: https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/
And while there are many pros that come with the VA loan, they do require that a fee be added to the loan amount. It is called the VA Funding Fee and is a percentage of the overall loan amount. The amount can vary depending on a few factors, so it is important that homebuyers understand how it works and what they can expect to pay.
What is the VA Funding Fee?
The VA mortgage is fully backed by the US government and is one of the most attractive and flexible mortgages out there for those who qualify. The VA Funding Fee is a one-time payment made to the Department of Veterans Affairs. This fee was created to help support the VA home loan program.Because the VA loan is guaranteed by the Department of Veterans Affairs, the lender is partially protected from loss because the government insures the loan if the borrower defaults. The fee ensures that the program remains sustainable and helps with costs related to the VA home loan program.
How much is the VA Funding Fee?
The Department of Veterans Affairs reviews and changes the funding fee periodically. As of November 2021, the funding fee percentages for purchasing transactions are:Use | Down Payment | VA Funding Fee |
First use | Less than 5% | 2.3% |
5% or more | 1.65% | |
10% or more | 1.4% | |
After first use | Less than 5% | 3.6% |
5% or more | 1.65% | |
10% or more | 1.4% |
*Exemptions may apply. Final exemption eligibility is up to the VA. Source: www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/#va-funding-fee-rate-charts
As you can see from the chart above, those using a VA loan can qualify for a lower funding fee by paying a larger down payment. As of late 2021, qualifying homebuyers who put down less than 5% when buying a home for the first time will pay 2.3% of the total loan amount and 3.6% on subsequent loans.
VA Funding Fee for Refinances
For refinances, first-time VA borrowers will pay a 2.3% funding fee, while subsequent borrowers will be required to pay 3.6%. For VA Streamline refinances, also known as Interest Rate Reduction Refinance Loans (IRRRL), the funding fee is 0.5% for all borrowers. IRRRLs are when you refinance your current VA loan into another VA loan.VA Funding Fee Exemptions
According to the U.S. Department of Veterans Affairs, those using VA financing will not be required to pay the VA Funding Fee if one of the below is true1:- Receiving VA compensation for a service-connected disability, or
- Eligible to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead, or
- The surviving spouse of a Veteran who died in service or from a service-connected disability, or who was totally disabled, and you're receiving Dependency and Indemnity Compensation (DIC), or
- A service member with a proposed or memorandum rating, before the loan closing date, saying you're eligible to get compensation because of a pre-discharge claim, or
- A service member on active duty who before or on the loan closing date provides evidence of having received the Purple Heart
Paying the VA Funding Fee
Now that we know how the VA Funding Fee is calculated, you are probably wondering when it must be paid. The fee is due at the time of closing. There are a few options for paying the fee:- Financed as part of the home loan
- Paid upfront as a closing cost
- Paid by the Seller
Taking Advantage of Your Well-Deserved VA Benefits
While a VA Funding Fee may be required, VA financing offers a multitude of benefits to make homeownership accessible to those who have served our Nation.If you aren't sure if you qualify for VA financing, speaking to a Certainty Loan Officer is a great place to start. Get pre-qualified today to take full advantage of your well-deserved VA benefits.
1Source: https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/