What is the VA Funding Fee?
A quick what’s what when it comes to the VA funding fee. Where did it come from? Who is it for? Who doesn’t need it? How much is it? How is it different for National Guard and Reserves? Take a look at the VA’s quick answer sheet regarding the VA Funding Fee. Here’s what the VA has to say about it.
History Extremely Abridged:
The original Servicemen's Readjustment Act, passed by the United States Congress in 1944, extended a wide variety of benefits to eligible veterans. Under the law, as amended, the VA is authorized to guarantee or insure home, farm, and business loans made to veterans by lending institutions.
Since the programs inception, 20 million VA home loans have been insured by the United States Government.
Generally, all Veterans using the VA Home Loan Guaranty benefit must pay a funding fee. This reduces the loan's cost to taxpayers considering that a VA loan requires no down payment and has no monthly mortgage insurance. The funding fee is a percentage of the loan amount which varies based on the type of loan and your military category, if you are a first-time or subsequent loan user, and whether you make a down payment. You have the option to finance the VA funding fee or pay it in cash, but the funding fee must be paid at closing time.
Who does NOT pay the VA funding fee?
• Veterans receiving VA compensation for a service-connected disability;
• Veteran entitled to receive VA compensation for a service-connected disability, but receives military retirement pay in lieu of compensation or active duty pay;
• Surviving spouse of one who died in service, from a service-connected cause, or totally disabled; and receiving Dependency and Indemnity Compensation (DIC);
• Service-members with a proposed or memorandum rating from VA, prior to loan closing, as eligible to receive compensation as a result of a pre-discharge claim;
• Service-members on active duty who provides, on or before the date of loan closing, evidence of having been awarded the Purple Heart.
What does the funding fee cost?
You Should Know!
1) The funding fee for second time users who do not make a down payment is slightly higher.
2) Also, National Guard and Reserve Veterans pay a slightly higher funding fee percentage. As of January 1, 2020, the Blue Water Navy Veterans Act will impact the funding fee percentages depending on your category of service and loan type, please review the following with your broker to determine the path most beneficial to you moving forward.
3) This fee is paid by borrower and is calculated as a percentage of the loan amount. It must be paid at the time of closing or included in the loan balance.
Do you still have some questions, or is there another topic you want us to cover in the near future? Feel free to reach out to us on our contact page and share what’s on your mind. We always appreciate the chance to talk to the community and look forward to hearing from you.
**If you feel that you are entitled to a refund of the VA funding fee, please contact your mortgage holder or VA Regional Loan Center at (877) 827-3702 to request a refund.**
All information on this post was brought to you courtesy of the United States Department of Veteran Affairs VA. For more info. visit va.gov, the official site of the USDVA.
