VA Funding Fees

What are VA Loan Funding Fees?

VA Loans originated from the Servicemen’s Readjustment Act in 1944, which offered veterans a federally-guaranteed home loan. VA Loan Funding Fees were added into VA Loans so that veterans can contribute to the benefits they receive through the VA Loan Program, thereby lowering taxpayer costs. Funding fees are required by law. However, they can usually be rolled over into the loan itself, so VA Loan borrowers don’t have to pay the funding fees out-of-pocket. VA Jumbo or Super Jumbo Home Loan recipients, however, do pay a certain portion of the funding fee.

Funding Fee Rates

Funding fee rates can be anywhere from 0.5% to 3.3%, depending on the type of VA loan and the borrower’s situation and history.

Current funding fees:

  • 0.5% for VA Streamline Refinance Loans, which is why the Streamline Refinance program is quite popular with veteran homeowners.
  • 2.15% for No Down Payment VA Loans for first-time borrowers
  • 3.3% for No Down Payment VA Loan second-time users
  • 1.5% for a down payment of 5%
  • 1.5% for a down payment of 10% or above

Funding Fee Exemptions

Certain VA Loan recipients are exempt from paying funding fees, such as:

  • Surviving spouses – If your spouse passed away in service of his or her country or due to service-related reasons, you are exempt from the funding fee; and
  • Veterans who are compensated by the VA for service-related disabilities – If you are more than 10% disabled, you qualify for an exemption as well.

VA Jumbo Loan Funding Fees

VA Jumbo Loans and Super Jumbo Loans are available for veterans and qualified parties who want to purchase a home with a price tag above what has been deemed the cutoff price for their county. The cap for VA Loans used to be $417,000, but with home prices varying so widely from county to county, the limits now reflect those variations.

VA Jumbo Loan recipients are responsible for the funding fees above $417,000, unless the recipient lives in a county with a higher cap. VA Jumbo and Super Jumbo borrowers have to pay the remaining funding fees in cash. Sometimes, highly-motivated sellers will pay the remaining funding fee in order facilitate the process and close more quickly.

For example, if Joe decides to use a VA Jumbo Loan for a $500,000 home in a county where the limit is $417,000, he will be responsible for the funding fees associated with the difference of $83,000. If Joe is a first-time homebuyer and has funding fees of 2.15%, then he will be responsible for paying 2.15% of $83,000 in cash, which comes out to $1,784.00.

The Appeal of Funding Fees

Funding fees are highly preferable to the monthly private mortgage insurance (PMI) payments as well as high interest rates that come with conventional mortgage loans. Moreover, because the VA Loan recipient can roll over the funding fee into their loan itself, the VA Loan borrower can still get into their new home with no down payment and 100% financing and still enjoy lower interest rates and the other benefits of VA Loans.