Understanding the VA Funding Fee
The VA Funding Fee is a mandatory fee paid to the Department of Veterans Affairs, not the VA Lender you are using.
Generally, all Veterans using the VA Home Loan Guaranty benefit must pay the VA Funding Fee, thereby reducing the cost of the VA Loan Program to taxpayers.
The percentage of the VA Funding Fee varies based on your loan amount, service category, the amount of down payment – if any – and if the borrower is a subsequent VA Loan user. The funding fee can be paid in cash, but does not have to be an upfront cost and can be rolled into the total cost of the loan.
To receive an exemption from the funding fee, you must fall in one of the following categories:
- A Veteran receiving VA compensation for a service-connected disability
- A Veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay
- A Surviving spouse of a Veteran who died in service or from a service-connected disability
Other Loan Costs
You are also required to pay closing costs for your loan. The closing costs vary according to your home’s location and lender, because these include payments on such information as VA appraisal, your credit report, state and local taxes, your title evidence and recording fees.
While the cost of these fees can seem daunting, you should remember that you do have flexibility in negotiating interest rates with your lender. The goal of the VA loan is to help you, not to make the process more complicated than you can handle.