VA Loan Fees
While VA Loans do not have PMI (private mortgage insurance), it might have a Funding Fee. The Funding Fee is only associated with VA Loans, and is paid directly to the Department of Veteran Affairs. The Funding Fee insures the VA against risk, and is the main reason that there is no down payment on VA Loans.
If you were to default on your mortgage, the VA pulls from its funding fee coffers to offset the bank or lenders losses. This offset is known as the VA's 25% guarantee, which lowers the risk for the bank or lender, allowing them to offer 100% financing.
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How the Funding Fee Works
- If you are on active duty or do not have 10% or more VA disability, your funding fee will be 2.3% the first time you use your VA Loan.
- For all subsequent uses, this fee goes up to 3.6%.
- If you are in the Reserves or National Guard, your funding fee will be 2.3% the first time you use your VA Loan.
- If you are a veteran with 10% or more of a service-related VA disability, or an active duty member awarded the purple heart, you can have the funding fee waived.
- You may be able to lower your required funding fee with a down payment.
*Certain restrictions/approval may apply
Working with Alix Clowser & everyone at Military Home Spot Lending was an absolute pleasure. The home buying process was a bumpy ride, but Alix was one of the most attentive and competent people I've ever dealt with. She was there every step of the way to guide me & deal with whatever obstacles came our way. I'm fairly certain that without having Alix as my loan officer, and the tireless eff orts from everyone at Military Home Spot Lending, I probably wouldn't have closed on the house of my choice.GET STARTED NOW!
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Funding Fee vs. Private
Mortgage Insurance (PMI)
Although the funding fee and private mortgage insurance are similar in nature, they have very big differences. PMI is added when a home buyer purchases a home without a 20% down payment. This gives buyers a hefty fee that is tacked on to monthly payments until 20% of the total loan is paid. With most VA Loans, instead of having to pay PMI, funding fees are added to the total loan amount. Funding fees are significantly lower than PMI and can be rolled into your loan balance at closing.