VA Loan Funding Fee Facts
One of the ways the Department of Veterans Affairs offsets the cost of the VA loan program is through something called the VA loan funding fee. This is a percentage of the loan value paid by the borrower as part of the cost of the VA loan.
The funding fee is has a set of variables which can affect how much the borrower pays; those variables include the amount of down payment, the nature of the borrower’s military service, and the type of home purchased in some cases.
For example, first time VA borrowers with a no-money-down VA loan who are regular active duty military members would pay a VA loan funding fee of 2.15%. That fee applies regardless of whether the borrower is currently serving, retired or separated from the military. Borrowers who are in the National Guard or Reserves with a zero down payment VA home loan would pay a VA loan funding fee of 2.4%. Guard and Reserve borrowers pay a slightly higher VA loan funding fee.
The funding fee goes down if the borrower makes a down payment. For example, an active duty borrower putting between five and ten percent down would only be required to pay a VA loan funding fee of 1.50%. The same borrower putting ten percent or more of the loan as a down payment would be charged a VA loan funding fee of 1.25%.
For the Guard and Reserve borrower, the five to ten percent down payment makes the VA funding fee 1.75% and more than ten percent down drops the VA loan funding fee to 1.5%.
These percentages are in effect at the time of this writing but may be subject to change at any time based on alterations of the VA loan rules, legislation or other factors.
It’s also worth noting that these VA loan funding fee percentages are for new purchase homes only. The VA has a different set of funding fee rates for refinancing loans and manufactured home loans. We’ll cover those rates in another blog post.