VA Funding Fee
VA Funding Fees – VA loans typically cost you no cash “out of pocket” however, in order to receive a VA loan you will be charged a fee that vary depending on your veteran status.
This is called a Funding Fee and is required by law. Instead of paying monthly mortgage insurance as in a conventional loan where you put down less than 20% of the loan amount, a VA loan charges a small fee that offsets the need for mortgage insurance.
Generally, “Funding Fees” for VA home loans fees range from 0 to 3.3% of the loan amount. So on a $200,000 VA home loan the funding fee maximum of would be about $6600.
First time use, purchase of an eligible property – Up to Sept 30, 2011
| Down Payment | Active Duty | Reserves/NG |
|---|---|---|
| 0% to 4.99% | 2.2% | 2.4% |
| 5% to 9.99% | 1.50% | 1.75% |
| 10% + | 1.25% | 1.5% |
Second time use, purchase of an eligible property
Down Payment
| Active Duty | Reserves/NG | |
|---|---|---|
| 0% to 4.99% | 3.3% | 3.3% |
| 5% to 9.99% | 1.50% | 1.75% |
| 10% + | 1.25% | 1.5% |
Effective with loans closed on or after October 1, 2011, VA has announced changes to Funding Fees in Circular 26-11-12:
The fee for subsequent use loans with less than 5 percent down payment and subsequent use regular refinance loans will be 2.8 percent for both active duty Service members, Veterans, and persons qualifying based solely on service in the Reserves or National Guard.
oFunding fees for IRRRLs will not change and will remain at 0.50%.
oAdditional fee changes for other than subsequent use will change as is outlined in the following chart. Down payment type “Less than 5%” would also be the funding fee for refinance transactions other than IRRRLs:
| Type of Veteran | Down Payment | % for First Time Use | % for Subsequent Use |
| Regular Military | 0% to 4.99% (Less than 5%)5 – 9.99% (5% but less than 10%)
10% or more |
1.40%0.75%
0.50% |
2.80%0.75%
0.50% |
| Reserves/National Guard | 0% to 4.99% (Less than 5%)5 – 9.99% (5% but less than 10%)
10% or more |
1.65%1.00%
0.75% |
2.80%1.00%
0.75% |
Funding can be fully financed - The good news is the VA funding fee can be rolled in with the total loan amount in the event you are limited on funds…so no out of pocket cash by you is required.
Basically this funding fee waives the mortgage insurance that normaly is paid monthly on conventional loans. The rational for the funding fee is that you, the VA borrower are contributing to the fee payment thus reducing the burden on taxpayers – however the fee costs you nothing out of pocket.
What are the Fees for a Streamline Refinance Loan?
There is a .5% funding fee for using the IRRL program to refinance your home. This fee can be fully financed which means it’s “rolled into the new loan amount”.
This fee helps defer the cost of private mortgage insurance that would have been required had you taken out a conventional loan. Keep in mind, VA charges no monthly mortgage insurance premium, instead letting Vets pay a funding fee of .5%
Who is Not Required to Pay VA Funding Fee
Disabled Vets May Waive Funding Fee – If you are deemed 10% disabled as a result of your military service, VA rules state you are not required to pay any funding fee.
While there is a funding fee for a VA home loan, some people are exempt from paying. If you are a veteran getting disability compensation for service-related medical issues,or are entitled to get compensation if you aren’t drawing retirement pay, you are exempt from the VA funding fee for your VA home loan. Also, surviving spouses of those who died in the service, or from service related disabilities are also exempt. It doesn’t matter in this case whether the spouse has any of their own entitlements. Remember that the VA has the last word on who is exempt, and some issues may be dealt with on a case-by-case basis. If you have any doubts, ask your local VA rep to review your service records (or your spouse’s records) and get a determination from the VA.
VA Funding Fee Example
How VA Funding Fee is Calculated - VA funding fee is based on a few variables like your military status and whether or not you put a down payment the loan. Guess what? The greater your down payment the less less VA funding fee you’ll be required to pay. In a nutshell… more down payment – less fee.
There is a cost advantage to buying with a down payment and you should attempt to put something down – if possible.
For example, say your looking to buy a $200,000 home. If you’re a regular veteran paying no down payment, you will be required to pay a 2.15% funding fee, about $4300. Since the funding fee is “rolled into your loan” you are financing $204,300. Your monthly payment would be $1,224 and overall interest paid, assuming a 30 year fixed rate at 6%, would be about $236,340.
Financing the same loan with 5% down payment would require only1.5% funding fee. So the amount you are financing is $192,850 ( 200,000-5% plus 1.5%). Your monthly payment is now about $1,156, and your overall interest payment is $223,310. You’ll save about $13,030 in total interest payment if you put down 5%, ($10,000) towards your loan.
Think of it this way: You save about $68 monthly or $816 annually by paying the 5% down. The decision to put a cash deposit down depends entirely on your financial situation and so consider all your expenses and if you can afford to put that “chunk of cash” down.
Reserve and National Guard Funding Fee If your in one of these branches the funding fee is sightly higher starting at 2.4% with no down payment. If you can scrap up a 5% deposit you will be charged a 1.75% funding fee. This fee, of course can be fully financed.
