The Department of Veterans Affairs has announced changes to VA loan funding fees effective 1 October, 2011. For VA home loans closed on or after that date, the new rates apply.

At the time of this writing, the VA loan funding fee for first-time use, with a 5% or less down payment is 2.14% for active duty veterans and 2.40% for Guard and Reserve veterans who qualify.

In October, the rates are lowered to 1.40% and 1.65% respectively. Rates are also lowered for those making down payments of 5% or more, and 10% or more.

VA loans for subsequent use currently have a funding fee of 3.30% for both active duty and Guard/Reserve members. After October 1, 2011, those fees–for those making a down payment of 5% or less–will drop to 2.80% for one year, then drop again on October 1, 2012 to 2.15 for active duty, Guard and Reserve vets. Yet another drop is scheduled for October 1, 2013 when the VA loan funding fee for second-time use becomes 1.25%.

The VA loan funding fee for second-time use for borrowers putting down 5% or more changes in October but does not change again in subsequent years. The new VA loan funding fee for these borrowers will go down by .75% across the board for active duty, Guard and Reserve VA loan applicants.

In some cases the VA loan funding fee rates remain unchanged. For example, the funding fee for VA loan assumptions and Interest Rate Reduction Refinancing loans or IRRRLs remains at .50%. This is true for both active duty and Guard/Reserve members or veterans. The Department of Veterans Affairs reminds borrowers that further changes to the VA loan funding fee structure could occur; “Should Congress pass legislation making additional changes to the funding fee structure, VA will immediately publish a notice on our website.”

At the time of this writing no other known proposed changes are pending. We’ll publish a complete list of the changes to the VA loan funding fees in another blog post, or you can learn more from the VA official site.

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