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Mortgage Guide

How to get a home loan

Calculating the VA funding fee for a VA Loan


The VA funding fee is a government fee applied to nearly every VA home purchase and refinance. The VA funding fee covers the cost of the VA Loan Guarantee and is paid directly to the Veteran Affairs Administration. This fee will be within 0.50% - 3.3% of the home purchase price. This doesn’t inhibit your ability to have 100% financing for your purchase as the VA allows for this to be included in the financing of your request.

Read on below to learn more about the funding fee and your eligibility.

VA funding fee exemptions.

The VA funding fee applies to all VA Loan home purchases unless granted an exemption. There are three basic categories to receive an exemption from the VA funding fee:

1. Veterans receiving disability income.

2. Veterans with a disability of 10% or more.

3. Surviving spouses of veterans that died in the service or of service-related disabilities.

If you are unsure if you qualify, ask your local VA rep to review your service records and/or your spouse’s service records and get a determination from the VA. Whenever there is a question of eligibility, the VA will have the final decision. So, it’s best to go straight to the source to avoid any confusion.

A quick summary of the VA Loan Limit and Guaranty.

As mentioned above, there wouldn’t be a VA Loan unless there was a VA funding fee. Your lender doesn’t see any of this fee. Instead, the fee goes directly to the Veterans Affairs Administration for the direct purpose of guaranteeing more VA Loans.

As a brief summary, the VA Loan benefit allows for 100% financing within the VA Loan Limit, has low closing costs, and no private mortgage insurance (PMI). The VA Loan Guarantee does all of this by guaranteeing 25% of your loan to the lender. If anything should happen that prevents you from making your payments, the VA will pay out 25% to reduce the losses the lender otherwise would have incurred. Overall, this lowers the risk which makes it easier for Veterans to get home loans. For an overview of all the benefits of the VA Loan, take a look at our main VA Page or download our free eBook, The Complete Guide to VA Loans.

What is calculated in the VA funding fee?

There are four things to consider when trying to calculate your funding fee:

  1. Down payment
  2. Type of veteran (such as Active duty, Reserves, or National Guard)
  3. Whether it’s your first time using your VA Loan benefit (If you previously used a different type of loan but did not use your VA benefit, you would fall under first-time use funding fee).
  4. VA disability status (veterans receiving disability income or more than 10% disabled are eligible for funding fee exemptions).

Review the funding fee tables below to better understand what your funding fee percent will be.

Check eligibility here.

First-time use funding fees are less to help Veterans become homeowners. The Veterans Administration has worked hard to make the barrier to entry as small as possible.

Check eligibility here.

Second-time VA Loan use sees slightly higher fees as the veteran has had more time to build up equity from their previous home to put towards their second purchase. All of the same benefits apply as they did with the first purchase, the only difference is the higher funding fee.

Check eligibility here.

Based on the above, you should have a good idea of what your funding fee percent is going to be. Take, for example, Michael Caldwell. Michael is a US Veteran with full Entitlement remaining, and he’s going to purchase a home for $250,000 with $0 down. He’s not disabled, so his funding fee will be 2.15% of $250,000. His funding fee will be $5,375 and he’s decided to finance this into his loan. So, he’ll be financing $255,375. Michael will use seller credits to cover the remaining closing costs for his loan, which means he’s able to purchase his home with no money down.

Conclusion.

The VA funding fee is on all VA Loans by default unless you’re qualified for one of the exemptions mentioned here. Assuming you need to pay for the funding fee, rest assured that this cost is going to pay it forward to future veterans who need to use the VA Loan benefit. Most veterans will end up paying 2.15% for their first VA Loan purchase, but as this can be financed into your VA loan, it isn’t any additional hardship. 

If you have additional questions, we can be reached by phone: 855-610-1112, chat below, or you may email me directly at russell@newcastle.loans.

In addition, we recently published "The Complete Guide to VA Loans," which you can download for absolutely free! It will walk you through all the details about how documentation, benefits, getting approved, and closing on your VA Loan. Click the button below to get your free copy!

Get the free VA Loans ebook!

References:

Funding Fee Table: https://www.benefits.va.gov/homeloans/documents/docs/funding_fee_table.pdf 

Funding Fee Calculator: https://www.veteransunited.com/education/tools/funding-fee-calculator/

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