What Is the VA Funding Fee and Why Do I Have to Pay It?

VA loans offer one of the best ways for U.S veterans to buy a home of their own. Approved by the Department of Veterans Affairs and facilitated by VA-approved lenders, the VA loan is an attractive option because of its affordability. To secure home ownership through a VA loan, a veteran does not need to make a down payment nor are they required to get private mortgage insurance.

However, there are a few costs that you will have to incur to secure the VA loan. One of the primary costs associated with the VA loan is the VA funding fee. This fee is applicable to every VA loan. The purpose of this is to keep the overall VA loan cost under check. Although it cannot be refunded, payment of the fee can be made after loan closing and then financed into the loan. This is the option that most borrowers choose to take. Let’s now get into the details of the VA funding fee and why you need to pay it.

Making the Funding Fee Payment: Why It is Necessary

A fee charged by the government, the funding fee is applicable to all VA purchase and refinance loans. The Department of Veterans Affairs collects this fee and uses it to cover any losses. The VA also collects the fee to keep the VA loan program running into the future for eligible veterans. The funding fee is not constant and can change over time based on several factors. This includes the type of the loan and whether the veteran used the benefit before.

Compared to Reservists and members of the National Guard, members of the regular military pay a slightly lower funding fee for the VA loan. Additionally, some select veterans such as people with service-connected disabilities may get a complete exemption from paying the fee. So, unless you are exempted from the payment, you will have to pay the funding fee to secure a VA loan.

VA Funding Fee for VA Purchase and Refinance Loans

As mentioned earlier, the funding fee is applicable to all VA purchase and refinance loans. The amount to be paid will vary depending on the type of loan, type of military personnel, and the amount of VA loans previously used. Following are two tables showing the fee for VA purchase and refinance loans.

Funding Fee for VA Purchase Loans

Veteran TypeDown Payment1st Time UseSubsequent Use
Regular MilitaryNone2.15%3.3. %
 5% -10%1.50%1.50%
 10% of more1.25%1.25%
Reserves/National GuardNone2.4%3.3. %
 5%-9.9%1.75%1.75%
 10% or more1.5%1.5%

 

Funding Fee for VA Refinance Loans

Service1st UseSubsequent Use
Regular Military2.15%3.3%
Reserves/Guard2.4%3.3%

 

There you have it—the VA funding fee structure for both the VA purchase and refinance loans. To know more about the funding fee and the amount you will have to pay, get in touch with us today!