Our country is extremely grateful for the service provided by our military men and women. As a small token of all our appreciation, the government has a loan program for United States Military Veterans.
Veterans who take advantage of this loan program get the benefits of no down payments, low interest rates, seller paid closing costs, and many others.
The sad truth is, everything costs money and the VA Loan is no exception. In order for the loan to continue to be a zero down loan and free from mortgage insurance, the government and tax payers have to pay for that cost.
In order to offset that cost to tax payers, there is a small fee for the loan. The great thing about the fee is that it not only ensures the continuation of the VA Loan program, but it can be rolled into the loan itself resulting in the Veteran purchasing a home with no upfront money.
There are also exceptions to paying the fee. The government has decided that if a veteran has a service connected disability of 10% or more, they are not required to pay the fee. It’s just one more way of saying “thank you.”
So how much of a fee is there? It depends on three things; your type of service and time in that service, if you are putting any money down, and if you have used your VA benefit previously. It starts as high as 3.3% for a Veteran using the benefit more than once, and goes as low 1.25% when a Veteran puts at least 10% down.
Even though it’s not a lot of fun to have to pay a funding fee, it’s still better than using a conventional or FHA loan with their associated fees and generally higher interest rates. Plus, by purchasing a home with your VA Loan and paying the funding fee, you’re keeping the program alive and ensuring that other Veterans will be able to use the benefit in the future.