The VA loan funding fee is required by law. This fee is enables veterans who obtain a VA home loan to contribute toward the cost of this benefit, thereby lowering the cost to taxpayers.

VA Funding Fee

The VA loan funding fee is required by law. The fee, currently 2.15% percent on no down payment loans, is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is 3.3% percent. 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.

For purchase and construction loans, members of the regular military fall into the category of first time user or subsequent user. For first time users, no down payment requires a 2.15 % fee, up to 10% down payment requires a 1.5% fee, and 10% or more requires a 1.25% fee. For subsequent users, no down payment requires a 3.3 % fee, up to 10% down payment requires a 1.50% fee, and 10% or more requires a 1.25% fee.

For the category of Reserves / National Guard, first time users with no down payment requires a 2.4 % fee, up to 10% down payment requires a 1.75% fee, and 10% or more requires a 1.5% fee. For subsequent users, no down payment requires a 3.3% fee, up to 10% down payment requires a 1.75% fee, and 10% or more requires a 1.5% fee.

Cash-out refinancing loans for regular military requires a 2.15% fee for first time users and a 3.3% fee for subsequent users. For Reserves / National Guard, the requirement is a 2.4% fee for first time users and a 3.3% fee for subsequent users. On interest rate reduction loans, the VA funding fee is .50% and it is 1.0% on Manufactured Home Loans.

The following persons are exempt from paying the funding fee:

Veterans receiving VA compensation for service-connected disabilities.
Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay.
Surviving spouses of veterans who died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan).

Please note that the VA has the final say on who is exempt.

VA Loan News, Guidelines, and Information for Veterans

:: VA Guaranty and a VA Loan--Is There a Difference?

Many assume the VA provides the money for a VA guaranteed loan, but private banks issue the actual VA mortgage—no money comes from the VA unless the buyer defaults and goes into foreclosure.

:: VA Loan Assumption

Active duty military members facing PCS moves or veterans who want to sell an old home and buy a new one are often faced selling their home before the VA loan is paid in full.

:: VA Loan Eligibility After a Military Spouse's Death

Death benefits connected to VA loans are intended for surviving spouses only. They are not extended to other family members including siblings or children.

ADDITIONAL ARTICLES