The VA LOAN FUNDING FEE

In order for the VA to guarantee the your loan to the mortgage company you are using to get your home loan, including where we lend in Minnesota, Wisconsin, Iowa, North Dakota, South Dakota, and Florida, there is a fee assessed by the VA to originate the loan called a "funding fee".

This VA funding fee is required by law. The fee is intended to enable veteran who obtains a VA home loan to help contribute a small amount toward the cost of this benefit, and thereby eliminate any to the cost to taxpayers. Essentially this small contribution (funding fee) by all VA loan participants goes into the giant VA default kitty fund to cover any VA defaults without ever having to ask tax payers to cover VA foreclosures. A win win for everyone. 

The VA funding fee you pay depending upon the type of VA loan you are getting (purchase or refinance), whether this is the first or second time you are getting a VA loan, if you are a disabled veteran, your down payment size, and if you served active duty or in the National Guard, or Reserves.

The funding fee for second time, or more, known as a VA subsequent Funding Fee is a bit more expensive. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment.

If you have at least a 10% disability due to military service, the VA funding fee is waived.

The VA funding fee on a VA cash out refinance is more expensive yet, while the VA funding fee on a VA IRRRL streamline refinance is rather low.

How you pay your VA funding fee

To pay your VA funding fee, you have a few options.  You can roll it into your new loan, you can pay it cash, or you can possibly even have the seller pay it.
 
The most common way is to roll it into your new loan amount. For example, if you buy a home for $100,000 with zero down payment, and have a 2.30% funding fee (see chart below), your actual mortgage would be $102,300.

Confused? Don't worry, just contact us at (651) 552-3681. One of our VA Loan Specialists will be happy to break down the numbers, and show you how this works for your individual situation.

How Much Is The VA Funding Fee?

This chart shows you what your VA funding fee will be on your loan. For example, a $100,000 loan, with no down payment on a regular military person would be 2.15% according to the chart, and therefore $2,150

Remember, while you can pay this out of pocket, almost everyone rolls it into your loan.

VA FUNDING FEE STRUCTURE as of APRIL 7, 2023

If you have a VA related disability of more than 10%, you will be exempt from any funding fee

New for 2020

• The VA has added a funding fee waiver for members of the Armed Forces who are serving on active duty and provide, on or before the date of the loan closing, certificate or military orders of having been awarded the Purple Heart.