Military Appreciation Month: VA Funding Fee Changes
WHAT YOU'LL LEARN
Today’s funding fees
When the change took effect
Which loans don’t qualify
WHAT YOU'LL LEARN
Today’s funding fees
When the change took effect
Which loans don’t qualify
Big changes are here for Department of Veterans Affairs (VA) loan borrowers – just in time for Military Appreciation Month! Each year, VA loans help thousands of qualifying veterans, service members, and spouses achieve homeownership through benefits like 100% financing and no loan limits for full entitlement. But now, the VA lowered its funding fees, giving more power to purchase the homes they so greatly deserve.
What is the VA Funding Fee?
The VA funding fee is a one-time payment that borrowers make on VA-backed home loans. The fee helps lower the cost of the loan for U.S. taxpayers because the VA doesn’t require down payments or monthly mortgage insurance.
Who Pays the Funding Fee?
Borrowers who receive or refinance a VA loan to buy, build, renovate, or repair their home must pay the funding fee. And keep in mind, borrowers can finance the fee into the loan amount. However, there are some who can avoid paying the extra cost.
According to the VA’s official website, you don’t have to pay the funding fee if you meet any of the following criteria:
You’re receiving VA compensation for a service-connected disability.
You’re eligible to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead.
You’re receiving Dependency and Indemnity Compensation (DIC) as the Veteran’s surviving spouse.
You’re a service member who received a proposed or memorandum rating before the loan closing date that says you’re eligible to get compensation because of a pre-discharge claim.
You’re a service member on active duty who, before or on the closing date, provides evidence of having earned the Purple Heart.
The Latest Changes
Borrowers with a VA purchase, construction, or cash-out refinance loan that closed on or after April 7, 2023 now pay 0.15-0.3% less in funding fees than previous years, depending on down payment and first or subsequent use. Here’s a full breakdown of the new funding fees:
Down Payment Amount | Funding Fee | |
First Use | Less than 5% | 2.15% |
5% or more | 1.5% | |
10% or more | 1.25% | |
Subsequent Use | Less than 5% | 3.3% |
5% or more | 1.5% | |
10% or more | 1.25% |
The new fee rates do not apply to Interest Rate Reduction Refinance Loans (IRRRL). For more information on funding fees and the VA’s cash-out option, reach out today. And most importantly, thank you for your service!