What is a VA Funding Fee?
It’s a very important question to ask, “What a VA funding fee?” as you think about using a VA home loan. Learn more about VA loan funding fees from SoCal VA Homes!
The VA funding fee is a percentage of the mortgage loan. The amount of a VA home loan funding fee is determined by the type of loan you are using, the borrower’s military category, whether a down payment is being made, and if the borrower is taking a loan for the first or subsequent time. VA funding fees are paid upfront, due at the close of escrow and can be paid all at once in cash or financed as part of the mortgage loan.
VA loan funding fees have a very specific purpose. The monies go to the Department of Veterans Affairs to keep the VA Home Loan Guaranty benefit running and to cover any lender’s losses associated with the program. The VA funding fee relieves taxpayers from covering the cost of the VA Home Loan Guaranty benefit.
Refinancing and VA Loan Funding Fees
If you’re interested in refinancing, the VA offers two options: the Interest Rate Reduction Refinance Loan (IRRRL) and the Cash-Out refinance. The IRRRL helps current VA homeowners get out of an adjustable-rate mortgage or, alternatively, to get a lower-rate loan. The Cash-Out refinance option allows Veterans to take cash from the equity of the existing loan and to refinance a conventional loan into a VA home loan.
Calculating Funding Fees
A few factors go into calculating the VA funding fee. The funding fee is 2.15% for military borrowers who do not make a down payment and are using their benefit for the first time. Buyers who make down payments between 5.0-9.9% will pay a funding fee of 1.5%. The funding fee is 1.25% for those who make a down payment of 10% or higher.
Fees for a first-time VA purchase are also different from funding fees for subsequent home purchases. Borrowers making a second VA-backed purchase have higher funding fees of 3.3%.
National Guard and Reserve members pay slightly higher funding fees than those in other branches of the military. Our VA funding fee calculator can help you estimate how much you might owe towards your funding fee.
Funding Fee Exemptions
Is it possible to be exempt from paying funding fees? Some borrowers are exempt from paying funding fees, such as those with service-related disabilities and spouses of those who died in service or from a service-related disability. SoCal VA Homes can help you determine if you are eligible for an exemption from VA funding fees.
Paying the Funding Fee
Your funding fees status and the rate will be determined by your lender during the loan process. It is very important to know that funding fee exemptions are not automatic and that you have to apply for them. Your lender can help you obtain your Certificate of Eligibility and other forms used by the VA to make determinations about exemptions and the final funding fee amount.
The funding fee is paid from the lender to the Dept. of Veterans Affairs right after closing. The funding fee comes from the borrower, who either pays the fee to escrow all at once in cash, or it is added to the base mortgage amount, thereby financing it into the monthly payments.
Contact Us Today!
If you have more questions about VA home loan funding fees, we are here to help! We are a team of military Veteran real estate agents and Sr. VA loan pros, and we specialize in helping Veterans achieve homeownership. We invite you to browse our listing of VA approved homes for sale in California. If you are ready to move forward financing your first home or are looking to refinance, contact us to discuss your VA home loan benefits!