Calculate your VA Funding Fee: What You Need to Know

Are you exempt from the VA funding fee?

Veteran sitting on the front porch with his familyIf you're in the market for a VA home loan, you'll need to familiarize yourself with the VA funding fee. This article will help make it a little less confusing.

What is a VA funding fee

Veterans and their families may take advantage of low-interest VA loans to purchase houses.

The VA loan is offered to veterans who have served the United States of America in the United States Armed Forces, including the Army, Navy, Air Force, Marines, Coast Guard, National Guard, and Reserve.

But what is the funding fee for a VA loan, and how much is it?

The funding fee is a one-time cost calculated as a percentage of the amount of the mortgage loan. It is payable to the Department of Veterans Affairs (VA) and is due at the conclusion of escrow or upon settlement. It may be paid in full up front or as part of the mortgage loan.

Why are you being charged this fee? Fees associated with VA loan financing serve a very particular function. They basically support the VA loan program by offering an insurance policy to the lender, shielding them from losses. Additionally, they assure that the loan guaranty program remains available to millions of military families for centuries to come.

VA Funding Fee Chart

When you purchase your home, you will be assessed a VA funding fee. The funding fee is nonrefundable. The higher your down payment, the smaller your VA funding fee. There are four different rates that you will be assessed depending on the amount of your down payment.

VA funding fee chart

VA Cash Out Refinance Funding Fee

The Department of Affairs offers two refinancing programs for eligible Veterans. The cash-out refinance program allows for additional cash back at closing, or can include the customary closing costs along with the payoff of the existing loan amount.

Funding fee percentage for VA cash out refinance

VA Irrrl Funding Fee (Interest Rate Reduction Refinance Loan)

The interest rate reduction refinancing loan, sometimes referred to as the VA Streamline Refinance, is an excellent lending option for qualifying Veterans. Income verification, appraisal, or credit standards are not required by the IRRRL.

Are You Eligible for an Exemption From the VA Funding Fee?

Purple Heart recipients and surviving spouses of veterans who died in the line of duty, as well as veterans with a disability rating of more than 10%, are free from the VA financing charge. Exemptions are available to about one-third of all VA loan borrowers; thus, contact your VA loan lender to discover your eligibility. Who Has to Pay the Funding Fee?

The VA funding fee is charged to all Veteran and service members, unless the service member is eligible for a waiver.

Your Certificate of Eligibility (COE) will normally state whether or not you are required to pay the funding fee.

Those who are obligated to pay the Veterans Administration funding fee must do so at settlement. In most cases, the lender is in charge of collecting the financing fee and transferring it straight to the VA via their automated system.


VA Funding Fee Exemptions List

Borrowers who are exempt from the VA funding fee

VA Funding Fee Calculation

Here's how to figure out how much the VA funding fee will cost you::

Loan amount – $200,000
Funding fee percentage X 2.3% = $4,600
Add the funding fee to the loan amount – $204,600
Final mortgage amount = $204,600

How Is the VA Funding Fee Paid?

The funding fee may be paid in one of two ways: Funding fees can be included in the loan amount, or they may be paid in full at the time of loan settlement.

Alternatively, you might request that the property seller cover the cost on your behalf. If the home seller agrees to pay the funding fee, the agreement must be included in the sales contract.

There is a sales concession limit. If the funding fee is paid by the home seller, the maximum limit is 4% of the sales price.

VA Loan Funding Fee Refund

What if, when you go through the process of obtaining a loan and buying a home, you learn that your disability claim was accepted after you've already closed and paid the financing fee? While this is annoying, the good news is that you may be entitled to a refund of the fee if you are later determined to be eligible for an exemption.

To be eligible for compensation, you must have been entitled to it prior to the date of the closure. If the compensation takes effect after the sale of your home is complete, you may be disqualified for a refund.

Please contact your lender or call the VA Regional Loan Center at (877) 827-3702 if you feel you are entitled to a refund.

Does The VA Funding Fee Change Each Year?

The VA funding fee for a VA loan is not expected to change, unless Congress or the President approves additional funding for the VA home loan program.

Frequently Asked Questions (FAQs) About Veterans Funding Fees

Q. Can the VA funding fee be rolled into the loan?
A. The funding fee is usually rolled into the loan.

Q. Do all VA loans have a funding fee?
A. Yes, there is a funding charge associated with all VA loans. The VA financing fee must be paid whenever you use a VA home loan to purchase a house, construct a home, repair a home, or refinance a mortgage loan, unless you qualify for one of the exemptions listed above.

Individuals who have been eligible for compensation for a service-connected disability or who are currently receiving compensation for a service-connected disability are included in this category.

Additionally, you may be exempt if you were given the Purple Heart while in active duty or are the surviving spouse of a deceased military member.

Q. Do you have to pay a VA funding fee on a refinance?
A. Yes, you do have to pay a VA funding fee on a refinance. The amount of the fee depends on a few factors, including whether you are using your VA loan entitlement for the refinance and whether you are refinancing a VA or non-VA loan.

Q. Can you pay the VA funding fee upfront?
A. Yes, you can pay the VA funding fee upfront. The fee can be paid in cash or financed as part of the loan; or the home seller is allowed to pay the funding fee.

Q. Do you pay PMI on a VA loan?
A. No, you do not pay PMI on a VA loan.

Q. Is the VA funding fee considered points?
A. No, the VA funding fee is not considered points. The VA funding fee is a fee that is charged by the VA in order to fund the VA home loan program.

Q. Is the VA funding fee a closing cost?
A. The VA funding fee is a closing cost, but it's also a one-time fee that you pay when you get your mortgage. The amount of the fee varies based on a number of factors, including your military service history and the size of your down payment (if required).

Q. Is the VA funding fee waived for disabled veterans?
A. Yes, the VA funding fee is waived for disabled veterans who receive a minimum 10% disability payment. This fee helps to cover the costs of the VA home loan program, so it's important to factor this into your budget when you're considering a home purchase.

Q. What are the disadvantages of a VA loan?
A. The VA loan has a funding fee attached to it, unless the veteran qualifies for an exemption. In most cases, investment properties and second homes are not permitted.

Q. What credit score is needed for a VA loan?
A. The VA doesn't set a minimum credit score, but most lenders require a score of at least 620.

Q. What is a VA loan funding fee based on?
A. The VA loan funding fee is based on a number of factors, including the size of the loan, the down payment amount, and whether the veteran has served in the military or is a spouse of a veteran.

Q. What percentage of disability does the veteran have to have for the VA funding fee to be waived?
A. The VA funding fee can be waived for veterans with a service-connected disability rating of 10% or more.

Q. When is the VA funding fee paid?
A. The VA funding fee is paid at the time of closing.

Q. Who pays the VA funding fee?
A. The VA Funding Fee is paid by the veteran. The fee is a percentage of the loan amount and varies depending on the type of loan, down payment amount, and whether the veteran is using their VA loan entitlement for the first time or has used it before.

Conclusion

In conclusion, the VA Funding Fee is a necessary evil that all Veterans must pay in order to obtain their VA home loan benefits. However, the amount of the fee can be reduced or waived altogether if certain eligibility requirements are met. So be sure to explore all of your options and take advantage of any available discounts. Thanks for reading!