In this part of our Illinois VA Loans series we will explain the VA Funding Fees.
The Funding Fees are assessed on all VA mortgages whether it is a purchase or a refinance loan. First time buyers will be asked to pay 2.15% of the total loan amount if they get a mortgage with no down payment. The fee is designed to provide funds for future loans in order to use less taxpayer money for the mortgage loans.
If a veteran chooses to sell the first home and use an Illinois VA mortgage on their next purchase, the fee increases to 3.3% if the second purchase is another no money down situation.
Keep in mind that if the veteran chooses to put up a down payment then the fee is reduced. For first time buyers the fee is only 1.5% if there is a down payment less than 10%. If the veteran chooses to pay more than 10% down then the fee drops to 1.25%
For refinances the rates are basically the same. However, if a veteran chooses to refinance the home with a streamlined Interest Rate Reduction loan, then the funding fee is only 0.5%
However, none of these fees have to be paid out-of-pocket. The VA guidelines allow veterans to add this fee in to the total loan amount, allowing the veteran to pay over time rather than pay up front.
The next part of our series will be the final installment and it will discuss credit issues that may come up in the application process.
For additional information, visit our Illinois VA mortgage page of our website. If you have questions or want to see if you qualify, contact me below or apply online!
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