What Is The VA Funding Fee?

​​The VA Loan is a great benefit for military members, Veterans, military Reservists, National Guard members, and some spouses. It is backed by the Department of Veterans Affairs and allows those eligible to purchase a home without requiring a down payment. This means that people who are entitled to the VA Loan benefit can buy a house without spending any money out of their own pocket.

The Department of Veterans Affairs does this as a benefit for those who have served their country. But they can’t do it without maintaining their own offices and employees. In order to pay the costs associated with the VA Loan program, there is a funding fee that comes with each VA Loan.

If you take advantage of the 0% down payment options, you’ll pay a funding fee of 2.3% of the loan value. This is paid to the Department of Veterans Affairs and is included in your closing costs. Depending on the purchase amount of your home, this can be a sizable amount. If you put some money down as a down payment, which is not required, the VA funding fee will be lower.

For those who have used their VA Loan previously and went through the steps to have their entitlement restored for a second (or third or fourth or more) purchase, the VA funding fee increases to 3.6%. This small increase can be a large dollar amount on a large purchase like a home. It is included in the closing costs and rolled into the overall value of your loan.

If you put down 10% or more, the VA funding fee is only 1.4% of the loan value. Your lender can help you calculate which option is more advantageous in the long run. Keep in mind that the VA funding fee is included in your closing costs while your down payment must be made at the time you close.