Putting the "Fun" in Funding Fee

PUTTING THE "FUN" IN FUNDING FEE

If you have ever considered using your VA Home Loan Benefit, you may have heard about the "VA Funding Fee".  There are a lot of rumors and misinformation about who pays the funding fee, and where it goes, but we hope to clarify things with the help of the VA Lenders Handbook (http://www.benefits.va.gov/warms/pam26_7.asp) and the VA Regional Loan Center in Denver, CO.

In order to defray the cost of administering the VA home loan program, some veterans must pay a funding fee to VA at loan closing.

The VA lender must verify the status of any veteran who may be exempt from paying the funding fee, determine the amount of funding fee owed by any non-exempt borrower, and collect the appropriate amount for payment to the VA.  The funding fee may be paid from loan proceeds or cash from the Borrower.

Congress may periodically change the funding fee rates to reflect changes in the cost of administering the program, or to assist a certain class of veterans.

Persons who are exempt from paying the funding fee are:

•·        Veterans receiving VA compensation for service-connected disabilities (there is no 10% minimum requirement, but compensable disabilities less than 10% are rare)

•·        Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay.

•·        Veterans who are rated by VA as eligible to receive compensation as a result of pre-discharge disability examination and rating.

•·        Veterans entitled to receive compensation, but who are not presently in receipt because they are on active duty.

•·        Surviving spouses of veterans who died in service or from service connected disabilities.

If the veteran's exempt status cannot be verified prior to loan closing, the funding fee must be remitted as if the borrower was not exempt.  If it is later determined that the veteran borrower was exempt from the funding fee, VA will refund the funding fee.  It is also advised that the veteran contact the VA RLC to request a refund if it is later determined that the veteran is entitled to compensation retroactively to a date prior to loan closing.

If it is determined that the Veteran Borrower is not exempt from paying the funding fee, the fee is determined by applying the appropriate percentage (derived from the VA Funding Fee Tables) to the Borrower's loan amount.

The most common funding fee is 2.15% for active-duty/first-time use, but there are 3 major factors that contribute to determining how to apply the Funding Fee tables to each Borrower's situation.  The first question is whether the Borrower was a member of the Regular Military or the Reserves/National Guard.  The second question is whether or not the Borrower will be making a down payment.  The third question is whether or not this is a first-time use, or a subsequent use of the VA home loan benefit.  In all scenarios, funding fees currently range from 0.5% to 3.3%.

NOTE: I ORIGINALLY WROTE THIS ARTICLE FOR KITSAP NAVY NEWS (http://kitsapnavynews.com/blog/dispelling-the-va-home-loan-funding-fee-commentary/633/), BUT I THOUGHT IT WOULD BE SUITABLE TO POST HERE ON AR AS WELL.

For more information about VA guidelines, please contact your mortgage lender or consult the VA Lenders Handbook.  We look forward to serving you!

Kevin Hancock
Loan Officer
License # MLO-108328

at

360.698.6478 office
206.849.6326 cell
425.283.4642 fax
kevin.hancock@legacyg.com
Please visit our new website at www.hancockmortgageteam.com