VA HOME LOANS: What’s the VA Funding Fee Thing About?

The VA Home Loan program aims to alleviate financial pressure on military homebuyers. With no down payments, low interest rates and no private mortgage insurance, a VA loan represents one of the most flexible and low-cost lending options available. 

But there’s one cost that’s unique to the VA program: the VA Funding Fee. This fee helps the Department of Veterans Affairs keep the program going. Without it, the agency would struggle to cover its losses in the event of foreclosure or default.

The Funding Fee is applied to every loan, purchase or refinance. There are exemptions for borrowers with service-connected disabilities and some surviving spouses. 

Regular military personnel pay smaller VA Funding Fees for home purchases than Reservists and Guard members. Below is a breakdown of fees for purchase loans for regular military members:

Down payment                          Funding Fee (1^st use)                       Funding Fee (2^nd use)

      None                                                2.5 percent                                         3.3 percent

   5-10 percent                                      1.5 percent                                         1.5 percent

   10 and up                                        1.25 percent                                       1.25 percent

Here is the fee table for members of the Reserves and the National Guard:

Down payment                                Funding Fee (1^st use)                      Funding Fee (2^nd use)

None                                                       2.4 percent                                              3.3 percent

5-10 percent                                       1.75 percent                                             1.75 percent

10 and up                                              1.5 percent                                                1.5 percent

Borrowers don’t have to cover the cost of the Funding Fee out of pocket. Most simply include the cost of the fee in their overall loan amount, a maneuver that results in a slightly higher mortgage payment each month.

Veterans who seek to refinance existing mortgages must also pay a VA Funding Fee. Those fees vary slightly depending on the type of refinance and the type of borrower.

Click to Get Pre-Qualified for a VA Home Loan