The VA Mandatory Funding Fee

Let’s look at the VA mandatory funding fee. So, the VA charges a fee on every VA loan, and no matter who the lender is, this fee is charged.

I’ve been asked sometimes, “Hey, what’s your VA funding fee? This lender is telling me this.”

It’s going to be the same no matter what.

It’s based off of your Certificate of Eligibility and what the VA is going to charge you.

So, it’s the same no matter what by every lender.

Now, this is a fee that’s paid directly to the VA at the time of closing, and there are three major ways that it’s paid for.

1. It’s paid for at closing by the buyer.
2. It’s paid for at closing by the seller.
3. Or what we most commonly see, the third option, it’s rolled into the loan.

And that’s where you don’t technically have to pay it right up front. It’s just rolled into the loan balance and on you go.

Now, you might be asking, how much is that VA funding fee and do I have to pay it in every scenario?

Well, you always have to pay what the VA is saying that it is.

And here’s the deal right up front, if you have a service-connected disability – which the VA estimates that about half of all veterans have 10% or greater disability – then you get that funding fee waived, gone out the window.

So, it’s very important that if you have a service-connected disability, you make sure your lender knows and understands that.

We should see it when we pull our Certificate of Eligibility anyways if we work a lot with the VA, but even then, you want to make sure it’s taken care of.

So, there’s a way to know if you’ve got a lender that gets it – are they asking you, “Hey Johnny, do you have at least 10% or greater service-connected disability? Do you have any VA disability compensation?”

Those are things you want to be hearing, because then you know that they’re trying to find out, “Can we get that funding fee waived and gone entirely?”

Because this funding fee is a pretty decent cost.

Here’s the deal – this goes to help make sure the program keeps running.

This essentially helps make sure that you can have no private mortgage insurance or mortgage insurance premium so you can do the 0% down.

And that charge, if it’s your first use of the VA loan and you have no VA disability compensation, that charge now is 2.15%.

Now, if you’re going to go use a VA loan any time after that first use, it pops up to 3.3% if you’re putting 0% down.

Now here’s the deal and a big reason honestly why I got into the mortgage business: to help our active-duty members and Veterans do the VA loan because I was there myself and honestly, I thought, “Man, you can’t put money down on a VA loan. It must be 0% only because it’s always told you 0% down, 0% down, no money down.”

In reality, you can put money down on a VA loan.

In fact, I always recommend, “Hey, if you can, there are some benefits to that.”

The big benefit is if you can put at least 5% down on a VA loan, then that pulls that funding fee down and it pulls it back on if you put between 5 and 10% down, it pulls it down to 1.5%.

So, if it’s your first use, you get a little bit of savings there. You go from 2.15% to 1.5%.

But if it’s any use there after – they call it subsequent use, that’s the term – then you pull that funding fee back from 3.3% to 1.5%.

As I like to say, you put 5% down, you get almost an instant 40% savings.

Not quite, you know, it’s like 36%, 37%, but you make a major savings one time right out the gate by putting 5% down.

And in the scenarios that I’ve personally run to try to build wealth throughout my time while I was in the military, putting that 5% down after your first use at a minimum.

So, if you can’t do your first round, okay, I get it. You don’t have the money necessarily. Do it the first round, great.

But by the time you’re doing that second, third, fourth PCS home purchase in your career, well in the military or even if you’re a veteran civilian outside moving around, great. You got to get to that point where you can put some of that down to reduce that funding fee.

So, you put 5% down, it pulls back to 1.5%.

And if you put down 10% or greater on a VA loan, it actually pulls it down a little bit more to 1.25%.

The only way to pull it back any more is to have that exemption.

So, one little nugget I want to throw in there to think about, especially if you’re active duty is if you’re getting out of the military, think ahead.

You can apply to have a VA funding fee waived before getting out of the military, pretty incredible.

A lot of lenders might tell you no, but there’s a way of doing that.

The key is you’ve already filed your claim.

You work with your lender, we can file the right forms to try to get an early notice from the VA.

If we can get that funding fee waived, it’s incredible.

We’ve helped folks save thousands of dollars while they’re going on their terminal leave or transition leave before getting out of the military. So just keep that in the back of your mind.

Heck, remember Evan Kaufman at WeVett, he can help make that one happen.

We can make it so that you can get that funding fee waived before technically separating or retiring.

Very important just to keep in the back of your mind.

So that’s a VA mandatory funding.

Know that it’s there, know that it’s going to be the same no matter what lender you work with, and the one way to eliminate is to get VA disability compensation.

So, pay attention to that when you’re getting out, or if you’re already out to make sure you take care of those claims.

If you have any questions, please feel free to give me a call or a text, shoot an email to loans@wevett.com or evan@wevett.com, either one.

We really hope this information helps you enable, empower, and go out there and win a home with the VA loan. Take care.