The VA loan funding fee is not a fixed amount but rather a percentage of the loan value that varies depending on several factors. These factors include whether it's your first time using a VA loan benefit, the amount of your down payment, your military service status, and the type of loan you are obtaining. This fee helps to reduce the cost of the VA loan program to taxpayers.
VA Funding Fee Table for Purchase and Construction Loans
The following table outlines the common funding fee percentages for VA purchase and construction loans.
| VA Loan Scenario (Purchase & Construction Loans) | Funding Fee Percentage |
|---|---|
| First-time VA loan user with a down payment of less than 5% | 2.15% of the loan amount |
| Subsequent VA loan user with a down payment of less than 5% | 3.3% of the loan amount |
Important Note: The funding fee percentages are lower when a borrower makes a larger down payment. For instance, putting down 5% or more on the purchase price will reduce the funding fee percentage. While specific percentages for various higher down payment tiers vary, the general rule is that the more money you put down, the less you will pay in funding fees.
Key Factors Influencing Your VA Funding Fee
- First-Time vs. Subsequent Use: If you are using your VA home loan benefit for the first time, the funding fee is generally lower than if you have used it previously.
- Down Payment Amount: As noted in the table, making a down payment of 5% or more can significantly reduce the funding fee percentage you'll pay.
- Loan Type: The percentages mentioned above primarily apply to VA purchase and construction loans. Other VA loan types, such as Cash-Out Refinances or Interest Rate Reduction Refinance Loans (IRRRLs), have different funding fee structures. For example, a VA Cash-Out Refinance typically has a funding fee of 2.15% for first-time use and 3.3% for subsequent use (unless exempt). A VA IRRRL, often referred to as a Streamline Refinance, usually carries a lower fee of 0.50%.
- Exemptions: Certain veterans and beneficiaries are exempt from paying the VA funding fee entirely. This exemption applies to:
- Veterans receiving VA compensation for a service-connected disability.
- Veterans who would be entitled to receive compensation for a service-connected disability if they did not receive retirement or active duty pay.
- Purple Heart recipients currently serving in the active force.
- Surviving spouses of veterans who died in service or from a service-connected disability, and who are receiving Dependency and Indemnity Compensation (DIC).
Example of VA Funding Fee Calculation
To illustrate how the funding fee is calculated, let's consider an example:
Suppose you are a first-time VA loan user purchasing a home for $350,000 and choose to make no down payment.
- Loan Amount: $350,000
- Applicable Funding Fee Rate: 2.15% (for first-time users with less than 5% down)
- Calculated Funding Fee: $350,000 * 0.0215 = $7,525
This $7,525 funding fee can typically be financed into the total loan amount, meaning you wouldn't need to pay it out of pocket at closing.
For more detailed information regarding VA loan funding fees and how various scenarios might impact your specific fee, comprehensive resources are available, such as the VA Funding Fee: What To Expect - Rocket Mortgage.
