What is the VA loan funding fee?

When veterans use their hard-earned perks to purchase a home for the first time, they may be subject to paying a VA loan funding fee at closing. Because VA loans are intended to offer a low-cost path to homeownership, and often offer the lowest monthly payment for qualified borrowers, you may be surprised to learn there is a specific fee associated with taking out a VA mortgage. 

What Is the VA Funding Fee?   

The VA home loan funding fee is charged to veterans or active-duty service members who are using their VA homebuyer perks. Though VA borrowers pay less in fees than FHA and conventional loans borrowers, they are uniquely obligated to pay the funding fee for VA loans at closing. 

The VA funding fee goes to the U.S. Department of Veterans Affairs and is intended to help sustain VA home loan programs– not only for those who qualify now, but for future service members as well. Paying the funding fee for VA mortgages helps to ensure future veterans can access the adequate, affordable housing they’ve earned. 

How Much is the VA Loan Funding Fee?   

VA funding fees vary from borrower to borrower. The Department of Veterans Affairs, not your lender, determines the fee you pay to access VA home loan perks. The exact amount of your VA funding fee varies based on two factors: the size of your down payment and whether you are a first-time buyer.  

VA loan fees may vary between 1.5% and 3%. Homebuyers using their VA perks for the first time will pay less than repeat borrowers, and those who put down up to 20% at closing will pay a lower funding fee as well. At The Federal Savings Bank, VA loans do not require a down payment, and will consequently require a VA funding fee.   

Other Places Where You May Encounter a VA Funding Fee   

If you use your VA perks to refinance your home, you will most likely pay a VA funding fee. The exact amount will vary significantly, because of the differences between cash-out and IRRRL refinances: 

1. Cash-out refinancing allows veterans to convert any equity they have in their home to cash and may even allow them to improve their interest rate in the process. These programs are available to vets whether they currently have a VA mortgage or not. The amount may vary depending on how many times you have taken out a VA mortgage. For the most up-to-date information, consult the VA website. 

1. IRRRL refinancing lets veterans convert their adjustable-rate mortgage to a fixed-rate loan. Because their mortgage is guaranteed by the VA, IRRRL borrowers often have access to better interest rates. This fee is always 0.5% of your loan.   

Lowering Your VA Loan Funding Fee   

If you do not want to pay the VA funding fee at closing, it is possible to include the VA funding fee in your loan. And it may be possible to waive the fee entirely.  

You can’t negotiate the rate or amount of your funding fee– the VA has final say on the total percentage of the loan amount you must pay them when you close. But you may have it waived if you’re actively serving, if you have a service-related disability, if you’ve been awarded the Purple Heart, or if you are a qualified surviving spouse. With the right documentation, and approval by the VA, you may have a chance of having the VA funding fee waived if you meet these criteria. 

At The Federal Savings Bank, we are invested in doing our part to help veterans and their families access their VA perks. If you have any further questions about the costs associated with a VA home loan, or if you’re interested in speaking with one of our veteran lending specialists, you can contact us at +1 877-788-3520. You can also explore our resources for VA homebuyers and VA refinances, and when you’re ready you can apply online.