VA Loans are a great option for military families. For the basic ins and outs of a VA Loan, check out our blog post HERE. VA Loans are no money down buying opportunities for military members. They make the ability to buy a home a reality without having a large downpayment.

Key Benefits of VA Loans

  • Available to veterans, service members, and surviving spouses
  • No down payment required
  • No mortgage insurance required
  • Lower closing costs
  • Lower interest rates

When you’re considering using a VA loan to finance your home purchase, it’s important to understand the various fees associated with this type of loan. While VA loans offer many benefits, including no down payment and lower credit score requirements, they do come with some fees that you’ll need to be aware of.

What is the VA Funding Fee

Something that is less frequently discusses, until you’re actively in negotiations, is the VA Funding Fee.

The VA funding fee is a mandatory fee that is paid by all VA loan borrowers. This fee helps offset the cost of the VA loan program and enables the VA to offer loans with no down payment and lower credit score requirements. The amount of the funding fee can vary depending on the type of loan you have and your military service status.

For first-time VA loan borrowers who are purchasing a home with no down payment, the funding fee is typically 2.3% of the loan amount. If you’re using a VA loan to refinance your existing mortgage, the funding fee is typically 0.5% of the loan amount.

If you’re a veteran with a service-related disability, you may be exempt from paying the funding fee.

It’s important to note that some lenders may offer to cover some or all of these fees as part of their loan program. However, be sure to carefully read the terms of any loan offer to understand what fees you’ll be responsible for.

“The VA funding fee is a one-time payment that the veteran, service member, or survivor pays on a VA-backed or VA direct home loan. This fee helps to lower the cost of the loan for U.S. taxpayers since the VA home loan program doesn’t require down payments or monthly mortgage insurance.” (Source: https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/)

However, starting April 7th, 2023, the VA loan funding fees are decreasing.

First time VA Loan users pay 2.15% of the loan price. If you put 5-9% down, the fee decrease to 1.5%. 10% or more lowers the fee to 1.25%. If this is your second VA Loan (or third, fourth, fifth, etc.) the VA funding fee is 3.4% with no money down. As a 2nd time VA loan user putting 5-10% down will save the most money at 1.5%. Ten percent or more down as a 2nd or more time VA loan user will put your funding fee at 1.25%.

Talk to your agent and lender. They should know the best way to help you save money. You can choose to pay your VA funding fee upfront or have it included in your loan payments.

VA Funding Fee Exemptions

There are also a few exceptions to the funding fee. Buyers that fall under these categories will not be required to pay a VA funding fee.

  • Currently receiving disability payments related to their time in service
  • Eligible for VA disability payments but is currently being pad as active duty or retired
  • A spouse of a deceased veteran with DIC Benefits
  • A Purple Heart Recipient
VA Loan

Other VA Loan Fees

In addition to the funding fee, there are a few other fees that you may encounter when using a VA loan. These fees can vary depending on the lender you work with and the state where you’re purchasing your home. Some of the most common fees include:

  • Appraisal fee: This fee covers the cost of having your home appraised to determine its value. This fee is typically paid upfront and can range from $300 to $500.
  • Title search and insurance: These fees cover the cost of a title search to ensure there are no liens or other issues with the property, as well as the cost of title insurance. These fees can range from a few hundred dollars to over $1,000.
  • Recording fees: These fees cover the cost of recording the loan with the county recorder’s office. The amount of the fee can vary depending on the state and the size of the loan.
  • Credit report fee: This fee covers the cost of pulling your credit report to determine your creditworthiness. This fee is typically paid upfront and can range from $30 to $50.

VA Loans are a great benefit, but there are a lot of details involved. Always educate yourself and work with a knowledgeable and trusted real estate agent. An agent and lender with VA load experience will be a benefit for getting the most out of your loan.

Looking for a military-friendly real estate agent in your area to buy or sell a home? Click here to fill out our Military Real Estate Questionnaire and we will help find you an agent that is a great fit or send a us a message.

Looking for a military-friendly real estate agent in your area to buy or sell a home? Click here to fill out our Military Real Estate Questionnaire and we will help find you an agent that is a great fit or send a us a message.