Learn about the VA funding fee and other closing costs you may need to pay on your VA-backed or VA direct home loan.
About the VA funding fee
What is the VA funding fee?
The VA funding fee is a one-time payment that the Veteran, service member, or survivor pays on a VA-backed or VA direct home loan. This fee helps to lower the cost of the loan for U.S. taxpayers since the VA home loan program doesn’t require down payments or monthly mortgage insurance.
Will I have to pay the VA funding fee?
If you’re using a VA home loan to buy, build, improve, or repair a home or to refinance a mortgage, you’ll need to pay the VA funding fee unless you meet certain requirements.
You won’t have to pay a VA funding fee if any of these descriptions are true for you:
You’re receiving VA compensation for a service-connected disability,or
You’re eligible to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead,or
You’re receiving Dependency and Indemnity Compensation (DIC) as the surviving spouse of a Veteran,or
You’re aservice member who has received a proposed or memorandum rating before the loan closing date that says you’re eligible to get compensation because of a pre-discharge claim, or
You’re aservice member on active duty who, before or on the loan closing date, provides evidence of havingreceivedthe Purple Heart
Funding fee refunds
You may be eligible fora refund of the VA funding fee if you’re later awarded VA compensation for a service-connected disability. The effective date of your VAcompensation must be retroactive to before the date of your loan closing.
If you get a proposed or memorandum rating after your loan closing date, you’ll still need to pay the funding fee. You won’t be eligible for a refund based on this rating.
If you think you’re eligible for arefund, please call your VA regional loan center at877-827-3702(TTY: 711). We’re here Monday through Friday, 8:00 a.m. to 6:00 p.m. ET.
How will I pay this fee?
You’ll pay this fee when you close your VA-backed or VA direct home loan.
You can pay the VA funding fee in either of these ways:
Include the funding fee in your loan and pay it off over time (called financing),or
Pay the full fee all at once at closing
How much will I pay?
This depends on the amount of your loan and other factors.
For all loans, we’ll base your VA funding fee on these factors:
The total amount of your loan. We’ll calculate your funding fee as a percentage of your total loan amount.
Depending on your loan type, we may also base your fee on these factors:
Whether it’s your first time, or a subsequent time,using a VA-backed or VA direct home loan,and
Your down payment amount
Note:Your lender will also charge interest on the loan in addition to closing fees. Please be sure to talk to your lender about any loan costs that may be added to your loan amount.
VA funding fee rate charts
Effective April 7, 2023
Review the VA funding fee rate charts on this page to determine the amount you’ll have to pay. Down payment and VA funding fee amounts are expressed as a percentage of total loan amount.
For example: Let’s say you’re using a VA-backed loan for the first time, and you’re buying a $200,000 home and paying a down payment of $10,000 (5% of the $200,000 loan). You’ll pay a VA funding fee of $2,850, or 1.5% of the $190,000 loan amount. The funding feeapplies only tothe loan amount, not the purchase price of the home.
VA-backed purchase and construction loans
Rates for Veterans, active-duty service members, andNational Guard and Reserve members
If your down payment is…Your VA funding fee will be…First use Less than 5% 2.15% 5% or more 1.5% 10% or more 1.25% After first use Less than 5% 3.3% 5% or more 1.5% 10% or more 1.25%
Note: If you used a VA-backed or VA direct home loan to purchase only a manufactured home in the past, you’ll still pay the first-time funding fee.
VA-backed cash-out refinancing loans
Rates for Veterans, active-duty service members, and National Guard and Reserve members
Note: The VA funding fee rates for refinancing loans don’t change based on your down payment amount. If you used a VA-backed or VA direct home loan to purchase only a manufactured home in the past, you’ll still pay the first-time funding fee.
Native American Direct Loan (NADL)
Type of useVA funding fee Purchase 1.25% Refinance 0.5%
Note: The VA funding fee rate for this loan doesn’t change based onyour down payment amount or whether you’ve used the VA home loan program in the past.
Note: The VA funding fee rates for these loans don’t change based onyour down payment amount or whether you’ve used the VA home loan program in the past.
Other loan closing costs
Who determines my loan details?
We don’t determine most details of your home loan.
Your home loan lender will determine these details of your loan:
Interest rate
Discount points (fees you may pay to your lender at closing to get a lower interest rate on your loan)
Other closing costs
These rates may vary from lender to lender. You should know that adding the VA funding fee and other loan costs to your loan could lead to you owing more money than the fair market value of the home. This could reduce the benefit of refinancing since your payment wouldn’t be as low as you may want it to be. It could also make it harder for you to get enough money out of the future sale of the home to pay off your loan balance.
Who pays for which closing costs?
The seller must pay these closing costs (sometimes called seller’s concessions):
Commission for real estate professionals
Brokerage fee
Buyer broker fee
Termite report (unless you’re using a refinancing loan)
You (the buyer) or the seller can negotiate who will pay other closing costs such as these:
VA funding fee
Loan origination fee
Loan discount points or funds for temporary “buydowns”
Credit report and payment of any credit balances or judgments
VA appraisal fee
Hazard insurance and real estate taxes
State and local taxes
Title insurance
Recording fee
Note:We require that a seller can’t pay more than 4% of the total home loan in seller’s concessions. But this rule covers only some closing costs, including the VA funding fee. The rule doesn’t cover loan discount points.
What is the VA Funding Fee? This is a fee that is charged to the veteran borrower to help offset the costs of the home loan program. It is the only closing cost that can be rolled into your VA Loan. If you have been rated eligible to receive VA compensation, you may be exempt from this fee.
Most of the closing costs associated with a VA purchase aren't part of an assumption. The person assuming the loan does pay a funding fee of 0.5 percent of the loan balance. That fee goes directly to the VA and helps keep the loan program running for future generations of military buyers.
You'll pay this fee when you close your VA-backed or VA direct home loan. You can pay the VA funding fee in either of these ways: Include the funding fee in your loan and pay it off over time (called financing), or. Pay the full fee all at once at closing.
However, low costs don't necessarily mean no costs. Like other types of home loans, VA loan borrowers will have to pay fees known as closing costs to lenders for processing their loan. Fortunately, VA loan borrowers have options to reduce the amount they pay out of pocket.
The most convenient way is to have the seller pay them. When making an offer on a home, your agent can ask that the seller pay a certain percentage or a particular amount of your closing costs.
The VA exempts specific borrowers from paying the funding fee on both purchase and refinance loans. Those exempt from paying the VA funding fee include: Veterans who receive compensation for service-connected disabilities. Veterans who would receive disability compensation if they didn't receive retirement pay.
This flat 1 percent fee covers the lender's costs associated with originating, processing and underwriting the loan. If the lender is charging the 1 percent fee, they are not allowed to tack on additional charges for things the VA considers overhead.
Yes, you can exempt the amount you paid for the VA funding fee along with your mortgage interest on your taxes. However, if you roll the funding fee into your mortgage, you can only deduct the amount you paid that year. If you paid the entire amount upfront, you can deduct the entire amount for that same tax year.
Average closing costs for Virginia range from 2% to 5% of the total loan amount. The average amount is about $3,425 for a $200,000 mortgage. That is just less than 2% of the loan amount and slightly more than the national average of $3,160.
Here are the VA non-allowable fees that you need to consider. Real estate attorney fees: Attorney fees are not allowed for VA home loans. Real estate broker fees: You cannot pay for real estate broker fees when buying a home with a VA loan. Agent or REALTOR® fees: VA borrowers cannot pay real estate agent fees.
You'll save on the VA funding fee: If you make a down payment, you'll pay a lower funding fee. Let's say you're a first-time homebuyer planning to take out a VA loan for $340,000. With no down payment (or a down payment of less than 5 percent), the funding fee would be 2.15 percent of that amount, or $7,310.
Going above asking helps you compete with other buyers who may have cash or are buying with conventional loans. “A buyer looking to present their offer with VA terms in the current seller's market will need to up the ante by offering a higher price, provided the appraisal allows it,” Gelios said.
A veteran who paid cash for the funding fee receives a cash refund for the amount of the overpayment. In the case of a veteran who paid the funding fee out of loan proceeds, the lender must apply the overpayment against the loan balance. Submit evidence to VA that the refund was applied to the loan's principal balance.
The VA loan origination fee is different from the VA funding fee. Veterans have to pay the funding fee to the US Department of Veterans Affairs while the origination fee is paid to an approved VA lender. The VA funding fee is charged on all VA loans by the Veterans Administration unless you are exempt.
The closing cost you put on your credit card may not exceed 2% of the loan amount. For example, if your loan amount is $350,000, you could charge up to $7,000. You must have enough money in your bank account to cover the charges.
One of the primary reasons some sellers may hesitate to accept a VA loan is due to misconceptions about the program. Some sellers believe that VA loans involve more red tape, delays, or stricter inspection requirements compared to conventional loans. In reality, VA loans are not as cumbersome as they may seem.
In Virginia, seller closing costs generally range from 7% to 9% of the sale price, depending greatly on the situation. As we mentioned earlier, the most significant portion of this is the real estate commission, which traditionally stands at around 5% to 6%of the home's final purchase price.
Introduction: My name is Edwin Metz, I am a fair, energetic, helpful, brave, outstanding, nice, helpful person who loves writing and wants to share my knowledge and understanding with you.
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