What is the VA?

Before we get into the funding fee I think it’s important to discuss what the VA is first. The VA, or Department of Veterans Affairs, is a federal government agency in the United States that provides a wide range of benefits and services to veterans, service members, and their families. The VA was established in 1930 to consolidate various programs and services for veterans and their dependents.

Some of the primary services and benefits provided by the VA include:

1. Health care: The VA operates a nationwide system of hospitals, clinics, and other medical facilities that provide medical care to eligible veterans.

2. Disability compensation: The VA provides disability compensation to veterans who have service-connected disabilities, meaning that their disabilities are a result of their military service.

3. Education and training: The VA provides educational assistance programs to help veterans and their dependents pay for college, vocational training, and other education and training programs.

4. Home loan guarantees: The VA guarantees home loans for eligible veterans, service members, and surviving spouses, which allows them to obtain favorable loan terms with little or no down payment.

5. Life insurance: The VA offers life insurance programs to eligible veterans and their families.

In addition to these services, the VA also provides a range of other benefits and services, including vocational rehabilitation and employment services, pension programs, and support for homeless veterans. The VA plays a critical role in supporting the well-being and livelihood of veterans and their families.

What is the VA funding fee?

The VA funding fee is a fee charged by the Department of Veterans Affairs (VA) on most VA-backed or guaranteed loans. This fee helps to offset the cost of the VA loan program, which allows veterans, service members, and eligible surviving spouses to obtain home loans with favorable terms and little or no down payment.

The amount of the VA funding fee varies depending on a number of factors, including the type of loan, the size of the down payment, and whether the borrower has used the VA loan program before. As of 2021, the VA funding fee ranges from 0.5% to 3.6% of the loan amount.

Here's a breakdown of the VA funding fee amounts by loan type and down payment:

• Regular Military:

  • First-time use: 2.3% with no down payment or 1.65% with down payment of 5% or more

  • Subsequent use: 3.6% with no down payment or 1.65% with down payment of 5% or more

• Reserves/National Guard:

  • First-time use: 2.4% with no down payment or 1.75% with down payment of 5% or more

  • Subsequent use: 3.6% with no down payment or 1.75% with down payment of 5% or more

• Other loan types (e.g. Interest Rate Reduction Refinance Loan):

  • 0.5% of the loan amount with no down payment or equity requirement

It's important to note that certain borrowers, such as those with service-connected disabilities or surviving spouses of service members who died in the line of duty, may be exempt from paying the VA funding fee. Additionally, borrowers who receive VA disability compensation may be eligible for a refund of the funding fee if they paid it at the time of closing.