01 Apr Understanding the VA Loan Funding Fee: What It Is and How It Works
For many veterans and active duty service members, the VA home loan program is a valuable resource for achieving homeownership. However, one aspect of this program that needs to be clarified is the VA loan funding fee. This blog post will explain the funding fee, how much it costs, and how it works.
What is the VA Loan Funding Fee?
The VA loan funding fee is a one-time fee that the Department of Veterans Affairs charges to help offset the costs of the VA home loan program. This fee is typically added to the total loan amount and financed over the life of the loan.
How Much is the VA Loan Funding Fee?
The VA loan funding fee amount depends on various factors, including the loan type, the down payment size, and the veteran’s service history. Here are the current funding fee rates for VA loans:
Regular military with no down payment: 2.3%
Regular military with a down payment of 5% or more: 1.65%
Reservist or National Guard with no down payment: 2.4%
Reservist or National Guard with a down payment of 5% or more: 1.65%
Subsequent use with no down payment: 3.6%
Subsequent use with a down payment of 5% or more: 1.65%
It’s important to note that these rates are subject to change, so it’s always a good idea to check with the VA for the most up-to-date information.
Waivers and Exemptions for the VA Loan Funding Fee
Veterans may sometimes be eligible for waivers or VA loan funding fee exemptions. For example, veterans who receive VA disability compensation are typically exempt from the funding fee. Additionally, some surviving spouses of veterans may be eligible for a waiver of the funding fee.
How to Pay the VA Loan Funding Fee
As mentioned earlier, the VA loan funding fee is typically added to the total loan amount and financed over the life of the loan. However, veterans do have the option to pay the fee upfront if they prefer. Sometimes, this may make sense if the veteran wants to reduce their overall loan costs.
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While the VA loan funding fee can add to the overall cost of a VA home loan, it’s important to remember that this fee helps to make the program possible in the first place. By paying the funding fee, veterans are able to access a range of benefits and advantages that can make homeownership more accessible and affordable. While it may be an additional cost to consider, the VA loan funding fee is a small price for the many benefits of the VA home loan program.