What is the VA Funding Fee?
If you’re a borrower who qualifies for a VA loan, you probably have questions about the VA funding fee. This is a special fee that the borrower using a VA loan pays to help reduce the cost of the loan that’s covered by U.S. taxpayers. If you want to learn more about who has to pay this fee and how much the VA funding fee costs, keep reading!
Who Has to Pay the VA Funding Fee?
If you’re using a VA loan to finance purchasing, building, renovating, or refinancing a home, you will most likely have to pay the VA funding fee. However, even then, there are VA funding fee exemptions. For example, if you have a service-related disability you may not have to pay this fee. Active members of the military who have received the Purple Heart may also not have to pay.
If you’re the widowed spouse of a service member who is using a VA loan to purchase your home, you also may be excluded from having to pay the fee as long as you’re receiving Dependency and Indemnity Compensation. Finally, any service member who is eligible for compensation due to a pre-discharge claim may qualify for VA funding fee exemption.
You will generally have three options for how you can pay the fee. Firstly, you can pay for it over time along with your other mortgage payments. Second, you might choose to pay it all at once upfront. Lastly, in some cases, you may be able to get the seller to cover this fee. If you are able to pay the fee upfront, you will save money over the lifetime of your loan.
How Much Does the VA Funding Fee Cost?
There are already so many costs associated with becoming a homeowner. The last thing you want is another expense. Unfortunately, there isn’t an easy answer to figuring out how much your VA funding fee costs. It varies based on the type of loan you get and how much the loan is for. Sometimes your down payment will also be a factor as well as whether or not you’ve used a VA-backed loan in the past.
That being said, you can typically expect to pay around 2.3% of your loan amount for the VA funding fee. If you’ve borrowed using a VA loan before, the cost goes up, often to around 3.5% of the loan amount. However, if you can make a down payment of at least 5%, the fee might not be as high. These rates have also changed in the past and are subject to possibly change again in the future.
The price of the fee used to be dependent on your role in the military. In the past, if you were in the Reserves or the National Guard, you may have paid more than a regular service member. As of 2020, these rules have changed so that all service members regardless of position pay the same amount.
Find Out More About the VA Funding Fee
Still want to find out more about the VA funding fee? The Carolina Mortgage Team at Revolution Mortgage can help! We know just how confusing mortgages can get, but we simplify the process for borrowers. Get started by contacting us today!