VA loan guide
The VA funding fee is a one-time charge on most VA home loans, paid to the Department of Veterans Affairs at closing. It's figured as a percentage of the loan amount, and the percentage depends on the type of loan, whether it's your first VA loan, and how much you put down. Many veterans are exempt, including those who receive VA compensation for a service-connected disability. You can pay the fee at closing or, in most cases, add it to your loan.
Most people have never heard of the VA funding fee until it shows up on their Loan Estimate. Then they want to know what it is, why they're paying it, and whether they really have to.
Fair questions. Here's the plain-English version: what the fee is, how it's figured, who doesn't have to pay it, how refunds work, and how to pay it.
As always, ZYNG Mortgage isn't affiliated with the Department of Veterans Affairs. The fee goes to the VA, not to us or to the lender.
The funding fee is how the VA home loan program helps pay for itself. In the VA's words, it "helps to lower the cost of the loan for U.S. taxpayers". There's no monthly mortgage insurance on a VA loan, so this one-time fee does some of the work that mortgage insurance does on other loans.
It's not a lender fee, and it's not negotiable with the lender. The rate is set by law and by the VA.
The VA funding fee is a percentage of your loan amount. Three things decide which percentage applies to you:
Purchase and construction loans, cash-out refinances, Interest Rate Reduction Refinance Loans (IRRRLs), assumptions, and certain manufactured home loans each have their own fee. Generally, an IRRRL and an assumption carry the smallest fees, and a cash-out refinance is on the higher end.
If this is your first VA loan, the fee is lower than on a subsequent use, for many loan types. One quirk: if your only past VA loan was for a manufactured home, the VA still treats your next loan as a first use.
On a purchase, putting money down lowers the percentage. There are tiers: less than 5 percent down, 5 percent or more, and 10 percent or more. At 5 percent or more down, the fee is the same whether it's your first use or a later one.
On a cash-out refinance, your equity doesn't change the fee.
The exact percentages change from time to time, so we don't print them here. Your Loan Estimate will show your fee, and your loan officer can show you how a down payment would change it.
This is the part that matters most. You're generally exempt from the VA funding fee if any of these is true:
That Purple Heart exemption is newer. It came from the Blue Water Navy Vietnam Veterans Act of 2019 and took effect in 2020.
Your Certificate of Eligibility generally shows whether you're exempt. Check it before you close. If you think you should be exempt and your COE doesn't show it, raise it right away. It's a lot easier to fix before closing than after.
Here's a situation that comes up more than you'd think: a veteran closes on a VA loan, pays the funding fee, and later is awarded VA disability compensation.
If the VA awards you compensation for a service-connected disability with an effective date before your loan closed, you may be able to get the funding fee refunded. A proposed or memorandum rating issued after closing doesn't qualify.
To ask about a refund, contact your VA Regional Loan Center. If you're in the middle of a disability claim when you buy, tell your loan officer. It may affect the timing you choose.
You have two choices:
Financing the fee means you don't need the cash today, but you'll pay interest on it for the life of the loan. If you can comfortably pay it at closing, run the numbers both ways.
Often, yes. A seller can pay some of your costs, and seller concessions, which can include paying the funding fee, are limited to 4 percent of the home's reasonable value as shown on the VA's Notice of Value. Regular closing costs the seller pays generally don't count toward that limit. Your real estate agent and loan officer can help you write the offer the right way.
A one-time charge on most VA loans, paid to the VA at closing or added to the loan.
It's a percentage of the loan amount that depends on the loan type, first or later use, and your down payment on a purchase. Your Loan Estimate shows your exact fee.
Veterans receiving or eligible for VA disability compensation, surviving spouses receiving DIC, service members with a qualifying pre-discharge rating, and active-duty Purple Heart recipients, among others.
Possibly, if you're later awarded disability compensation with an effective date before your closing. Contact your VA Regional Loan Center.
Yes, in most cases. On a purchase, it's the only closing cost you can finance.
Yes, generally, but it's smaller than on a purchase. Veterans who are exempt don't pay it. See VA Loan Programs.
No. That's one of the reasons the funding fee exists.
If you'd like to see what your funding fee would be, or whether you're exempt, start with our VA eligibility check or get a personalized quote. You can also read VA Loan Eligibility and How VA Loans Work, or call us at 530-888-6000.
ZYNG Mortgage, Inc., NMLS #76801. For information purposes only. This is not a commitment to lend or extend credit. Information and/or dates are subject to change without notice. All loans are subject to credit approval.
