What Is A VA Funding Fee?
The VA funding fee is a single lump-sum payment made on a house loan by an active veteran or surviving member. The VA funding fee is a fee that helps the VA recoup any losses incurred when a VA loan defaults. This fee is usually added to the loan amount so that the borrower isn’t required to come out of pocket for this expense. Borrowers are required to pay a VA funding fee unless there is 10% or more of a service related disability. Despite this sometimes costly fee, the VA loan is the best loan available for all active duty military and veterans who are eligible. There are a number of costs and benefits associated with VA home loans. Some of the costs include closing costs, funding fees, and term fees. The benefits of these home loans include lower interest rates, eligibility, tax deductions, and the ability to use the home as collateral.
VA Funding Fee Chart
The current VA Funding Fee Chart is available below for potential home purchasers interested in a new VA mortgage or refinance loan. While the Department of Veterans Affairs does not demand monthly mortgage insurance, this one-time funding fee is required unless the veterans are 10% or more disabled as a result of active military service.
The VA funding fee chart for 2021 is listed below. AS you can see, the funding fee varies based on how many times you have used your VA certificate and your down payment. Although it is not required, a 5% down payment can reduce the funding fee for both first-time customers and repeat purchases. The funding fee is only applied to the loan amount, not to the home’s official purchase price. This one-time fee can be paid upfront at closing or added to the mortgage balance.
VA Funding Fee Exemption 2022
The VA funding fees are not mandatory for all military personnel. On both purchases and refinance loans, the VA exempts certain borrowers from paying this one-time fee. The following people are exempt from paying the VA funding fee:
- A surviving spouse whose significant other died while serving his nation or became disabled as a result of his service.
- A purple heart recipient.
- Veterans who have a service-connected disability of 10% or more.
There are also others who may be exempt from the VA funding fee but that is based on disability pay and compensation.
VA Funding Fee Calculator
To determine how much your funding fee is, check the chart above to calculate how much money will be added to your loan amount. For example, if this is your first usage of a VA loan and there is no down payment, the funding fee would be 2.3% of the loan amount. So, on a $200,000 purchase price, the funding fee would be $4600 for a total financing loan amount of $204,600. However, the $4600 can be paid upfront so the loan amount remains at $200,000. Talk to your loan originator to determine which option is best for you. The VA funding fee calculator will calculate your monthly payment as well as the total cost of your loan throughout the life of the loan. When calculating your monthly payment, make sure the funding fee is added to your loan amount to ensure your payment is as close as possible.
Is The VA Funding Fee Refundable?
Some potential homeowners may be excused from paying this fee, and others may be eligible for a complete refund. If a veteran receives disability compensation after the case is closed, the funding fee may be refunded. It is, however, your responsibility to contact the VA and tell them of your new status. You’d get a cash settlement if you paid the funding fee in cash. If your mortgage has a funding fee, VA will deduct the fee from your principal.
Financial Consultant and Author