The VA funding fee is required by law.
The VA Funding Fee is paid directly to the Department of Veteran's Affairs and is the reason they can guarantee this no-money-down loan program. This fee is paid so that VA eligibile borrowers can enjoy loan benefits such as $0 down financing and no PMI payments.
So as a reference i created this for you the VA Funding Fees for 2012
For a first-time buyer the fee, is currently 2.15% of loan amount financed.
For second time users who do not make a down payment is 3.3%
The reason for the difference is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users should have had time to accumulate equity or save money towards a down payment.
For purchases or construction loans by active military or retired is:
Zero down for a 1st time user the VA Funding Fee is: 2.15%
5% down for a 1st time user the VA Funding Fee is: 1.5%
10% down or more for a 1st time user the VA Funding Fee is: 1.25%
Zero down 2nd time or more user the VA Funding Fee is: 3.3%
5% down for a 2nd time user the VA Funding Fee is: 1.5%
10% down or more for a 2nd time user the VA Funding Fee is: 1.25%
For Reserves or National Guard
Zero down for a 1st time user the VA Funding Fee is: 2.4%
5% down for a 1st time user the VA Funding Fee is: 1.75%
10% down or more for a 1st time user the VA Funding Fee is: 1.5%
Zero down 2nd time or more user the VA Funding Fee is: 3.3%
5% down for a 2nd time user the VA Funding Fee is: 1.75%
10% down or more for a 2nd time user the VA Funding Fee is: 1.5%
Cash-out refinancing loans
Regular military require a 2.15% fee for first time users and a 3.3% VA Funding Fee for subsequent users.
Reserves or National Guard, the requirement is a 2.4% VA Funding Fee for first time users and a 3.3% fee for subsequent users.
If there are down payments involved, refer to the information above. On interest rate reduction loans, the VA funding fee is .50% and it is 1.0% on Manufactured Home Loans.
Good news there are exceptions
- Veterans receiving VA compensation for service-connected disabilities.
- Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay.
- Surviving spouses of veterans who died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan).
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