How to Calculate the VA Funding Fee

You can get a VA home loan with no down payment if you are a veteran or active service member. However, you must pay a VA funding fee when you close your loan. This fee is used to help keep the VA home loan program running. If you have used a VA loan before, you will need to pay a funding fee again if you use a VA loan again. VA borrowers may be exempt from paying the VA funding fee if they have a service-connected disability.

You can use a VA mortgage calculator to help you figure out how much you will need to pay upfront. First-time VA homebuyers will have a different funding fee structure than those using a VA loan for subsequent use. It is essential to understand how the VA funding fee works and how it differs from mortgage insurance premiums. When you apply for a VA loan, understand how the VA funding fee will affect your loan.

VA Funding Fee: What is it?

The VA Funding Fee is a fee for the veteran when taking out a VA home loan. The funding fee is used to help cover the costs of the VA loan program and can typically range from 1.4 to 3.6 percent of the loan amount. The fee may be payable in cash at closing or in the loan amount.

The fee may be waived if the veteran is exempt due to a service-connected disability or is entitled to receive compensation due to their service.

For those required to pay the fee, it may be either partially or fully refundable depending on the type of VA mortgage taken out. An FHA loan may be subject to a different funding fee than a conventional loan, so it may be worthwhile to research VA loan funding fees on different loan programs.

VA Funding Fee Waiver: Who is Eligible?

Are you eligible for a VA funding fee exemption? This means you won't have to pay the funding fee at closing or roll the fee into your loan. Surviving spouses of veterans who died from a service-connected disability are also eligible for this exemption. Those who receive VA compensation for a service-connected disability or Purple Heart award are exempted from paying the funding fee upfront.

Additionally, if you receive military retirement pay or will do so within 12 months of closing your home loan, you may be eligible for a funding fee exemption. Check the requirements to determine eligibility for a VA funding fee exemption.

How Much Does the VA Funding Fee Cost?

As part of a VA home loan or VA mortgage, the Department of Veterans Affairs pays a one-time charge known as the VA financing fee. The funding fee amount depends on the loan type, whether the veteran is making a down payment, and if they are a first-time or repeat homebuyer.

VA Funding Fee Chart

How to Estimate the VA Funding Fee

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. Some veterans may be exempt from paying the fee, including those who receive disability compensation. It is essential to understand the VA loan funding fee and how it factors into closing costs before applying for a VA loan.

VA Funding Fee Exemption

Borrowers who are exempt from the VA funding fee

Can the VA Funding Fee Be Financed?

For those looking to secure a VA home loan, the cost of financing the VA Funding Fee can be included in the loan. This fee is paid directly to the Department of Veterans Affairs (VA) to access the lending program, ranging from 0.5% to 3.3% of the total loan amount. However, certain qualifying veterans may be exempt from paying this fee or receive a refund after closing.

When financing a VA mortgage, you can include the VA loan funding fee in the loan itself. The fee amount can be spread in monthly payments across the loan duration. The cost of the fee is added to the loan principal. Closing costs associated with the loan may also cover some or all of the fees.

It is essential to know that the VA Funding Fee is not always required, and certain veterans may be entitled to exemptions or refunds of the fee. Exempt individuals include veterans who receive disability ratings of 10% or greater and veterans on active duty who do not qualify for the exemption. Additionally, veterans can sometimes request a refund of the funding fee. If you have any questions about financing the VA Funding Fee, please get in touch with a qualified VA lender.

VA Funding Fee vs. Mortgage Insurance Premium (MIP)

When considering a VA Home Loan, the funding fee and the Mortgage Insurance Premium (MIP) are two of the highest costs. The VA Funding Fee is a one-time fee required by the Department of Veteran Affairs when obtaining a VA Mortgage or VA Loan. The fee is a percentage of the loan used to fund the VA Home Loan program. Since this fee is required for each loan, it is included in the closing costs.

The VA Funding Fee can range from 0.5% to 3.6% and is typically much lower than the MIP, which is required for all non-VA mortgages. However, the VA does offer exemptions for veterans meeting specific requirements. Veterans with a service-related disability, veterans receiving or eligible to receive VA compensation, and surviving spouses of veterans are all exempt from this fee. It is important to note that exemptions are not automatic and require an eligibility determination.

Understanding the Purpose of the VA Funding Fee

The VA Funding Fee is one of the closing costs that a veteran may be required to pay when taking out a VA Home Loan. The borrower pays a fee directly to the Department of Veterans Affairs. The fee helps to offset the costs of the VA loan program and is not associated with any other type of loan program. The specific fee amount varies depending on the type of loan, down payment, and other factors.

The VA Funding Fee applies to most VA mortgage loans, with certain exceptions. It is commonly required unless the borrower is exempt from paying the fee. Exemptions may include those who receive VA disability compensation, who are entitled to receive VA disability compensation, or who are surviving spouses of veterans.

In conclusion, the VA Funding Fee is a fee paid by borrowers of a VA mortgage loan to help offset the costs of the VA loan program. It is not associated with any other type of loan program, and the amount varies depending on the type of loan, down payment, and other factors. Some borrowers may be exempt from paying the fee.

How to Apply for a VA Loan and the Funding Fee

A VA home loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). The most significant advantage of a VA home loan is that it allows veterans and service people to purchase a home with no down payment and no mortgage insurance. However, when applying for a VA loan, borrowers must understand and pay the funding fee.

The VA loan funding fee is a one-time cost typically paid at closing. The funding fee is typically between 1.4-3.6% of the loan amount and is based on several factors, such as the type of loan and the veteran's service category. The funding fee helps offset the loan cost and funds VA loan guarantee programs.

The funding fee can be included in the total loan amount or paid separately. Those who receive disability compensation from the VA may be exempt from paying the funding fee. Homebuyers should discuss their VA home loan benefits and closing costs with a qualified loan originator.

Conclusion

The VA Funding Fee is a charge required by the Department of Veterans Affairs for homebuyers utilizing a VA loan to purchase a new home. As a one-time fee, the charge is added to the total loan amount and helps the VA cover the cost of administering the program. As a fee paid by the borrower, the VA Funding Fee is subject to change depending on the loan amount, the veteran type, and the loan type chosen.

Understanding how to calculate the VA Funding Fee is essential for all veterans and active duty service members considering a VA home loan, as the fee may affect the total amount paid. Calculating the VA Funding Fee for first-time homebuyers, for subsequent use, for Reservists and National Guard members, and for refinancing loans is a straightforward process. Additionally, some homebuyers may be eligible for a waiver of the VA Funding Fee.

Although the VA Funding Fee is an added cost, it is a way for the Department of Veterans Affairs to help cover the cost of administering the VA Loan program. The fees collected help make the VA Loan program more affordable for veterans and service members to achieve the American Dream of homeownership. Therefore, understanding the VA Funding Fee is critical for all borrowers considering a VA home loan.

SOURCE: Calculate the VA Funding Fee