VA Funding Fee – Which Veterans Pay it and Which do Not?

The VA funding is a fee paid by Veteran home loan borrowers when they use the VA’s home buying program. It is paid upfront and is allowed to be included in the final loan amount itself. VA loans do not have monthly mortgage insurance – sometimes called PMI or Private Mortgage Insurance. This VA funding fee goes directly to the VA and allows them to continue to offer veterans home loans. This funding fee in essence “takes the place” of that mortgage insurance. The VA guarantees the loan to the lender and the fee varies depending on the type of loan, if it is a first time use, manufactured home, disabled veteran and so on.

The Funding Fee is paid by nearly every veteran home buyer.  The only exception is for veterans who collect disability from the VA.  The fee is waived in that case. It is paid on all VA home loan transactions unless VA disability is received by the veteran.  The VA funding fee can vary  based on the type of service, whether you have been active duty or reserves and if the loan is a purchase, streamline refinance or cash out transaction.

Purchase & Construction Loans

Type of Veteran

Down Payment

First Time Use

Subsequent Use for loans 1/1/04 to 9/30/11

Regular Military None
5% – 10%
10% or more
2.15%
1.50%
1.25%
3.3%*
1.50%
1.25%
Reserve/National Guard None
5% – 10%
10% or more
2.4%
1.75%
1.5%
3.3%*
1.75%
1.50%

Cash-Out Refinances

Type of Veteran

Percentage for First Time Use

Percentage for Subsequent Use

Regular Military 2.15% 3.3%*
Reserve/National Guard 2.4% 3.3%*

* The higher subsequent use fee does not apply to these types of loans if the veteran’s only prior use of entitlement was for a manufactured home loan.

Other Types of Loans

Type of Loan

Percentage for Either Type of Veteran Whether First Time or Subsequent Use

Interest Rate Reduction Refinancing Loans (IRRRL)

0.50%
Manufactured Home Loans 1.00%
Loan Assumptions 0.50%

Should you want to see this chart directly on the VA website, click here.

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