VIDEO: Funding Fees: What’s the Purpose of VA Loan Funding Fees?

Why does the VA charge veteran homebuyers a funding fee? Find out today.

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From time to time, veterans will reach out to us asking, “If I buy a house for $300,000, why is the VA charging me another $9,000 on top of that?”

That extra amount is called the funding fee, but what exactly is a VA loan funding fee?

When you purchase a home with a VA loan, they’ll charge you a funding fee, but the good thing is they’ll just add it to your loan. For example, if it’s the first time you ever use the VA loan, the funding fee will be 2.15% of the purchase price. So if your house is priced at $100,000, you’d add 2.15% of that to your loan, making it $102,150.

There are a couple of notable exceptions: If you have any recognized disability, the VA will not charge you that fee. If you use the VA loan more than once, they’ll charge you a 3.3% VA loan funding fee.

A VA loan doesn’t require a down payment, but know if you do decide to put at least 5% down, the VA will reduce the funding fee all the way down to 1.5%. The reasoning here is that if you do put money down, you’re less risky.

Keep in mind that the funding fee does fund the entire VA program. If you want to refinance, they’ll charge you something called the VA IRRRL—this amounts to only 0.5% since you’ve already successfully been in the program.

If you have any VA funding questions, don’t hesitate to reach out to me. We’re here to serve our veterans.