By Jane Lasky
The VA loan program opens doors—literally. With this kind of help, veterans who would otherwise be unable to buy a home can do so without having to produce a down payment, and that’s a major help to vets looking to become homeowners.
So is the fact that these generous loans also tend to be more forgiving than conventional mortgages as far as credit and income requirements are concerned.
However, there is one cost that must be considered when thinking about using this unique loan: The VA funding fee.
A Set Fee
The VA funding fee is a set fee that is added to every new home purchase loan as well as refinance loans from the VA. The reason for this fee is to cover the costs of other loans of this type that go into default.
Fees that have been decided upon by the VA vary, depending on certain circumstances. So who pays what? And why do the fees vary from vet to vet?
The particulars vary and are based on the kind of service the borrower provided, as regular military members often pay lower fees than national guard members and reservists. Whether the borrower has held a VA loan in the past and whether or not a down payment is part of the deal also affects the fee amount.
In addition, disabilities are also taken into consideration. Those veterans who suffer a service related disability will typically not be facing any kind of funding fee. In fact, among the number of members who apply for this amazing loan, about one-third of them are exempt from the funding fee.
For regular military, the funding fee is 2.15 percent of any loan that does not require a down payment as long as that loan is the first loan of this type to be granted. Any other loan after the initial one will be charged 3.3 percent of the purchase price.
For those new borrowers who pay a down payment of between 5 and 10 percent, the VA funding fee is 15 percent of the purchase price. This is the same amount for both first-time buyers and those members who have already purchased another home in the past.
And, for those home buyers who are able to come up with more than 10 percent of their home value as a down payment, the VA funding fee is set at a mere 125 percent.
Other Home Buyers
As for members of the reserves and the national guard, those who fall into these two categories who don’t make a down payment will pay 2.4 percent of the purchase price if they are first-time buyers and 3.3 percent if this is not their first home loan taken.
Those who put down between 5 and 10 percent of the purchase price will pay 1.75 percent, and those who put down 10 percent or more will pay 1.5 percent in a VA funding fee.
Refinancing with money left over for other expenses, as well as without any money left over, are also options when it comes to VA loans. Both of these opportunities carry low funding fees but, like the other types of VA loans, these costs are hard to beat.