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VA Funding Fee

First-time borrowers of VA loans are required to pay a closing cost, called a funding fee, in order for the Department of Veteran Affairs to originate the loan. This funding fee is required by law and will vary in amount depending on the type of VA loan being borrowed and any previous use of entitlement.

For first-time borrowers, the funding fee required is just over two percent for no money down VA loans. Upon the second use of entitlement for a VA loan, the borrower will be required to pay a slightly higher funding fee of just over three percent. These same funding fee guidelines also apply to VA refinance.

Although the VA can decide on a case by case basis who can be exempt from paying the funding fee for a VA loan, there are general guidelines for exemption that borrowers should be aware of, as stated in the Veterans Benefit Act of 2004. Veterans who are claiming disability compensation for medical issues that are service-related are exempt from paying funding fees. Additionally, individuals who are entitled to disability compensation only if they do not collect retirement pay are also exempt, as well as surviving spouses of individuals who died in service or from service related medical conditions. Check with your lender for more information about VA funding fees and guidelines for exemption.

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