If you’re a service member, veteran, or surviving spouse and plan to use a VA home loan, then you’ve probably heard about the VA funding fee. But what is it, exactly? And more importantly, how much does it cost? In this blog post, I will answer all of your questions about the VA funding fee. I’ll explain what it is, how much it is, how to calculate it, and who has to pay for it. So if you’re curious about this important aspect of VA home loans, keep reading!
Table of Contents
What Is the VA Funding Fee?
The VA funding fee is a fee that’s charged by the Department of Veteran Affairs (VA) to provide a loan guarantee to the lender and help cover the cost of the VA home loan program. The fee is paid on each VA loan and is equal to a percentage of the loan amount. The percentage varies according to several factors. The factors include whether you’ve had a VA loan before, if you’re putting money down or what type of VA refinance you’re doing.
Veterans pay the funding fee instead of having to pay mortgage insurance that may be required on other loan types.
Who Pays The VA Funding Fee
The VA funding fee is paid by the service member, veteran, or surviving spouse on the purchase or refinance of a home when using a VA loan. The cost is the same for all active-duty, Reserve, or National Guard service members, as well as veterans and surviving spouses. This includes those who have served in the United States Coast Guard.
Native American veterans eligible for the Native American Direct Loan (NADL) are also required to pay a funding fee.
How The VA Funding Fee Is Calculated
The VA funding fee is calculated by multiplying the loan amount by the appropriate percentage. The fee can be paid upfront or rolled into your loan. The percentage varies depending on factors like whether you’ve had a VA loan before, if you’re putting money down or if you’re a disabled veteran.
VA Funding Fee Chart 2024
Review the VA funding fee chart 2024 below to determine your VA funding fee percentage for a purchase or refinance VA loan types:
Calculation Example
In 2021, the US median home price was $423,600. To help calculate the VA funding fee, let’s assume a $423,600 purchase price with no money down. If the veteran has used their VA loan benefit before and is subject to the subsequent use VA funding fee.
VA funding fee amount: $423,600 x 3.6% = $15,250
The fee for cash-out refinances is based on the first-time or subsequent use fee percentage regardless of the amount of equity in the home.
Paying The Fee
The funding fee can be paid upfront or rolled into your VA loan. Most borrowers choose to finance their VA funding fee. The fee is added to the loan amount and increases the amount financed as in the example below.
Total amount financed with the VA funding fee: $423,600 + $15,250 = $438,850
On home purchases, the funding fee can also be paid by the seller of the home if the veteran negotiates it as part of the sales contract. The seller may pay the VA funding fee for the veteran, but they are not required to do so.
The funding fee is collected by the lender and is typically paid at closing. The lender then pays the fee to the Department of Veteran Affairs. You can choose to finance all or part of the VA funding fee at closing. Financing the funding fee will increase the amount of your monthly mortgage payment.
VA Funding Fee Exemption
The VA funding fee can be waived in certain cases. If you currently are a disabled veteran, are eligible to receive VA disability, or are the recipient of a Purple Heart serving on active duty; the fee is waived. This VA funding fee exemption can save a disabled veteran tens of thousands of dollars.
Surviving spouses of veterans who died in service, are missing in action, are prisoners of war, have a service-related injury that resulted in death, or is totally disabled may be eligible for a VA funding fee exemption. Eligible spouses must be receiving Dependency and Indemnity Compensation (DIC) from the VA.
To receive the VA funding fee exemption, your VA Certificate of Eligibility will confirm receipt of VA disability compensation and verify exemption status.
Other Closing Costs
In addition to the funding fee, there are other closing costs associated with a VA loan. These costs can vary depending on the lender and the state in which the property is located in. Typically, they include items like title fees, an appraisal, lender fees, and taxes. A veteran is responsible for their own closing costs unless negotiated to be paid by the seller or other party.
Conclusion
The VA funding fee is a fee that’s charged by the Department of Veteran Affairs to help cover the cost of the VA home loan program. The funding fee is equal to a percentage of the loan amount, and it can be paid upfront or rolled into your loan. The percentage varies depending on factors like whether you’ve had a VA loan before, if you’re putting money down or what type of VA refinance. The VA funding fee can be paid by the veteran or the seller of the home, and it can be waived in certain cases.
I hope this article helped explain the VA funding fee. If you have any questions, please leave a comment below or contact me. And if you’re a disabled veteran or surviving spouse, don’t forget to check with your county to see if you’re eligible for a disabled veteran property tax exemption.
Ready to begin the VA home loan process? I can help. I’m a USAF veteran and specialize in helping veterans, service members and surviving spouses take advantage of their VA home loan benefit to buy or refinance their home.
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