VA loans are popular with eligible veterans because they do not require a down payment which is otherwise needed for other types of loans. Even with 100% financing, a VA loan also does not require a monthly mortgage insurance payment. However, there are many questions surrounding the VA funding fee. Here is an explanation of the VA funding fee – why it is in place and how much does it cost.
What is a VA funding fee?
The VA funding fee is a mandatory and one time charge that is implemented on all VA loans and collected at the time of closing. These collected funds are used to administer the VA loan program.
Why must I pay a VA funding fee?
Since a VA loan does not require a down payment and has no monthly mortgage insurance, the VA funding fee is a way to reduce the cost of the program to taxpayers.
How much is the VA funding fee?
Generally, the VA funding fee is a percentage of the loan amount and can vary from 0.5% to 3.3%.
The VA funding fee is determined by:
-type of loan
-if the borrower is making a down payment
-whether the borrower is in the Reserves or National Guard;
-if the VA loan is for a first time purchase or subsequent use
-if the borrower has a disability that is connected to their service in the military.
Funding fee rates can be changed by Congress in order to meet the cost of administering the program or to help certain veterans that fall into a certain category.
Is anyone exempt from paying a VA funding fee?
Those VA borrowers who are receiving VA compensation for a service connected disability are exempt from paying a VA funding fee. Also exempt are those who are entitled to receive service related disability compensation, but receive retirement or active duty pay instead. A surviving spouse of a Veteran who died in service or from a disability from service is also exempt from paying a VA funding fee.
While no one likes to pay fees, even the highest VA funding fee is lower that the required down payment for other types of mortgages. In addition, low down payment loans require monthly mortgage insurance while VA loans never require any monthly MI payments. Another fact to consider is that the borrower has the option to finance the funding fee by adding it to the mortgage. A knowledgeable VA lender can assist you throughout the process to assure that you receive the best VA loan available, low VA mortgage rates and 100% VA financing.
Feel free at any time to contact me for more information about a VA loan, the VA funding fee and VA 100% financing.
My loan process was very easy and quick. Not to mention a great loan rate. I couldn't be happier!
Capt Sam T. - US Army
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