If you’re planning to use a VA Home Loan to purchase or refinance your home, you’ll need to be prepared to pay a “funding fee” as part of your closing costs. How much you’ll pay depends on your loan type, down payment, and a few other variables (see the tables below for details).
To help AAFMAA Members in this situation better understand the funding fee, what you can expect to pay, and your payment options, we’ve asked AAFMAA Mortgage Services LLC (AMS) Chief Operating Officer Stacey Daniels to explain the current fee structure and exemptions.
AMS: What is the VA funding fee?
Stacey Daniels: The VA funding fee is a one-time payment (paid at closing) that the Veteran, Active Duty servicemember, 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.
AMS: What has changed about the VA funding fee?
SD: The Blue Water Navy Vietnam Veterans Act of 2019 caused the VA funding fee to rise from 2.15% to 2.30% for first-time borrowers and 2.40% to 3.60% for those who have previously used a VA Home Loan. Those changes took effect on January 1, 2020, and are expected to remain through 2022.
AMS: Does everyone pay the fee?
SD: Generally, yes. But there are exceptions for Veterans receiving VA service-related disability benefits or who have at least a 10% disability rating from the VA, Purple Heart recipients, and surviving spouses of servicemembers who died in the line of duty. Plus, you may be eligible for a refund of the VA funding fee if you are awarded VA compensation for a service-connected disability. If you think you might be eligible for a refund, please call you VA Regional Loan Center at 877-827-3702.
AMS: When do I pay the fee?
SD: There are two options. You can pay the VA funding fee at your loan closing by rolling it into your loan (financing) or paying it at the closing table as a lump sum. Your lender can discuss these options with you.
AMS: How much is the fee?
SD: Your VA funding fee is based on the type of loan you get and the total amount of your loan, and is expressed as a percentage of your total loan amount. Depending on your loan type, your lender may also base your fee on whether it’s your first time, or a subsequent time, using a VA-backed or VA direct home loan, as well as your down payment amount.
AMS: Will the fee drop in 2022? Should I wait?
SD: If you’re in a position to buy, now is a great time. Interest rates are near historic lows and housing prices are expected to continue to rise. So if you’re looking to purchase or refinance, I would advise AAFMAA Members to do so now.
Fees for VA-Backed Purchase and Construction Loans
The funding fee for VA Home Loans varies by how many times you’ve used the entitlement and how much you’ll be putting down. The tables below show the fees set in 2019 that are expected to continue until 2022.
If your downpayment is...
Your VA funding fee will be...
|Less than 5%
|5% or more
|10% or more
After first use
|Less than 5%
|5% or more
|10% or more
Rates for Veterans, Active-duty servicemembers, National Guard and Reserve Members are shown in the table below:
Fees for VA-Backed Cash-Out Refinancing Loans
|After first use...
Other VA Home Loan Types
VA Funding Fee
|Interest Rate Reduction Refinancing Loans (IRRRLs)
|Manufactured Home Loans (not permanently affixed)
|Vendee Loan, for Purchasing VA-Acquired Property
We’re Here to Help
If you’re not certain about whether or not it’s the right time to purchase a home or refinance your existing mortgage, please contact us online today or give us a call at 844-218-6926. An AMS Military Mortgage Advisor will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of low-rate and low-cost mortgages designed to meet your needs.
Ensuring our Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today!
For more information about how AAFMAA continues to support the military community during the COVID-19 crisis, visit www.aafmaa.com/COVID19.