Of the total amount borrowed with a VA home loan, the VA funding fee is a one-time fee of 2.3%.
The borrowers can apply for a VA loan more than once, but when using a VA loan after the first time and if the down payment is less than 5% then the VA funding fee increases.
Of the total loan amount, the VA funding fee ranges between 1.4% to 3.6%.
For borrowers who have previously used the VA loan program, the funding fee increases to 3.6%, but this can be reduced if they put a down payment of at least 5% at the time of closing.
The Department of Veterans Affairs requires VA funding fees and it gets applied to every VA purchase and refinances loan.
The purpose of charging a funding fee is to help cover any losses and to keep the program running for future Veteran homebuyers.
The calculation of the VA Funding Fee depends on various factors – like the type of VA loan, if the borrower has used the VA loan benefit before and if there’s a down payment.
Borrowers who have service-connected disabilities and select others might not have to pay the funding fees at all.
The Reservists and National Guard members pay slightly higher funding fees than what the regular military members pay.
However, now due to the passing of the Blue Water Navy Vietnam Veterans Act of 2019 fees for all military branches are equal.