For eligible veterans, active-duty service members and surviving spouses who are hoping to become homeowners, the VA loan program can be a difference-maker. VA loans are a type of government loan, which is any loan insured or backed by the U.S. federal government. A VA home loan offers good interest rates, low- or no-down-payment options and no monthly mortgage insurance requirement, making it a great mortgage choice for those who are eligible.
Though getting a VA loan has many upsides, all these benefits do come at a price – or rather, a fee. While it’s only a small percentage of the loan amount, the VA funding fee can be a significant cost for borrowers. So, what exactly is the VA funding fee, how does it work and how much can home buyers expect to pay? Let’s take a look.
The VA funding fee is a one-time fee paid to the Department of Veterans Affairs, and it supports the VA home loan program. Veterans who put down less than 5% on their home purchase will pay 2.15% of the loan amount when buying a home for the first time, and they’ll pay a funding fee of 3.3% on subsequent loans. VA borrowers can pay less on the funding fee by putting down more money on the home.
This governmental fee changes periodically based on legislative action by Congress.