What is the VA funding fee?

The VA funding fee is a fee charged to borrowers who use a VA home loan to purchase a home. The fee helps to offset the cost of providing these loans to veterans and to ensure that the VA home loan program remains financially viable.

The VA funding fee is a percentage of the loan amount and is typically financed into the loan itself, so borrowers don't have to pay it upfront (although it can be paid upfront). The exact percentage varies based on factors such as the type of loan, the down payment amount, and whether the borrower is a first-time or repeat buyer.

For first-time buyers using a VA loan to purchase a home, the VA funding fee is typically 2.3% of the loan amount for a regular military borrower and 1.65% for a borrower with a down payment of more than 5%. For repeat buyers, the fee is typically 3.6% of the loan amount unless putting down at least 5% (which then it is also 1.65%).

There are certain exceptions to the VA funding fee, such as for borrowers who receive disability compensation from the VA or who are eligible for a VA pension. In these cases, the VA funding fee may be waived.

It's important to note that the VA funding fee is not the same as closing costs, which are fees associated with the purchase of a home. Closing costs can include things like appraisal fees, title insurance, and attorney fees.

Overall, the VA funding fee is an important consideration for borrowers using a VA home loan to purchase a home. Understanding the fee and how it is calculated can help you make informed decisions about your home purchase.