Understanding The VA Funding Fee And Closing Costs

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this blog, we will discuss and cover understanding the VA funding fee on VA loans. VA loans are the best home mortgage program in the United States. However, not everyone can qualify for VA loans. You need to be an active and/or retired member of the U.S. Military with a certificate of eligibility (COE). Due to the government guarantee of the Veterans Administration (VA), lenders can offer VA home loans with no down payment required and 100% financing. Mortgage rates on VA loans are among the lowest out of any other home loan program. Even lower than conventional loans. There is no maximum loan limit on VA loans.

Seller Contribution To Pay For Closing Costs on VA Loans

Most of our VA  borrowers at Gustan Cho Associates do not have to pay closing costs out of their pockets. Closing costs are often covered with a sellers’ concession by the home seller. In the event, that the borrower is short of closing costs with a seller’s concession, the mortgage company can give the borrower a lender credit in lieu of a higher mortgage rate to cover the shortage in closing costs.

Closing Costs On VA Home Loans

The maximum amount of seller’s concession to the home buyer to homebuyers is a 4.0% seller’s concession to the homebuyer. VA loans do not have a mandatory mortgage insurance premium requirement. This holds true even with no down payment and 100% financing. However, the VA does require a one-time VA funding fee on all VA loans. Understanding The VA Funding Fee On VA Home Loans is important. There is a chart on the amount the borrower is charged on the funding fee. The funding fee can be rolled into the VA loans and does not have to come out of pocket. Gustan Cho Associates is a national mortgage company licensed in multiple states with no lender overlays on VA loans. In this article, we will discuss and cover Understanding The VA Funding Fee On VA Home Loans.

Understanding The VA Funding Fee When Qualifying For A VA Loan

One of the greatest rewards and benefits earned by our members of the armed services is becoming eligible for VA loans. Only U.S. military members with a certificate of eligibility (COE) can qualify for a VA loan. The VA funding fee is a one-time fee that can be rolled into the VA loan balance. Frequently asked questions about the VA funding fee are the following:

  • What is the VA funding fee?
  • Who pays for the funding fee and how much is it?
  • Why do certain borrowers get a discounted rate on the VA funding fee

In this blog, we will discuss and explain all about the VA funding fee.

VA Funding Fee Explained

Instead of charging borrowers an annual mortgage insurance premium, the VA has a one-time VA funding fee to support the existence of VA loans. Borrowers are responsible to pay for the one-time VA funding fee. Jammi Cash, a vice president of mortgage banking at Gustan Cho Associates, is a VA home mortgage expert. Jammi Cash said the following:

First, the fee helps offset the Veterans Administration costs and losses resulting from foreclosures. Basically, it lowers the cost to the taxpayer. Secondly, a VA funding fee is a form of mortgage insurance. Rather than charging monthly private mortgage insurance, VA only has a one-time funding fee. The amount varies based on the number of uses, down payment percentage, and service category. At the beginning of 2020, the VA funding fee chart changed for the first time in quite a while. The changes result from The Blue Water Navy Vietnam Act of 2019. The program will receive financial support from an increase in the VA funding fee for certain VA transactions. For instance, prior to 2020, the regular military paid a lower VA funding fee than those in the reserves or National Guard for first-time use. The regular military paid 2.15%, where others paid 2.4%. Although starting 1/1/2020, all military types pay the same thing as notated in the VA chart.

2022 VA Funding Fee Chart

Understanding The VA Funding Fee On VA Home Loans is important. Please study the VA funding fee chart below for 2022:

What is the new chart of VA financing fees? As mentioned earlier, VA loans are hands down the be home mortgage program in the U.S. The federal government created and launched VA loans as a reward for our men and women in uniform to thank them and their families for their service in protecting our country.

Understanding The VA Funding Fee And How The Funding Fee Is Determined

Michelle McCue,  a top producing loan officer at Gustan Cho Associates and a VA loan expert said the following:

VA lenders need to verify each of the characteristics above to figure the correct fee. That’s where the VA lender will request a borrower’s certificate of eligibility (COE). The COE provides lenders with valuable information to help structure the VA loan correctly for the borrower. Examples of information provided on the COE are the following: First or subsequent use. Entitlement available/used. Entitlement code. VA Funding fee exempt or not. If entitlement is tied up & how much. Existing VA loan amounts. Prior VA loss through foreclosure or short sale

The VA Funding Fee is generally paid by adding the total fee on top of the VA loan balance. It can also be paid with a seller’s concession or paid by the borrower if the borrower does not want it to be added to the loan balance. Here is a case scenario on how the VA Funding Fee works:

For instance, a first time VA buyer in the Navy with no money down on a $200,000 purchase price would borrow $204,600. $200,000 plus adding 2.30% funding fee ($4,600) results in the total $204,600 loan amount. Unless directed, this fee is automatically added on top. The borrower can choose to pay their funding fee at closing. A third party, such as the seller or home builder, can pay the fee or pay a portion. Historically, veterans considered 10% or more disabled by VA receive a VA funding fee exemption. That means the fee is not charged, saving the veteran anywhere from .50% to 3.60% of the loan amount in fees. That’s huge! Yet, another deserving group is exempt from the VA fee. Effective 1/1/20, the VA funding fee waives for active duty Purple Heart recipients. So, if you are active military and have been awarded the Purple Heart, ask about a VA funding fee waiver.

VA Lenders With No Overlays On VA Loans

How to qualify for a VA loan from a lender without overlays To qualify for a VA loan with a mortgage lender with no lender overlays on government and conventional loans, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at GCA Mortgage is available 7 days a week, evenings, weekends, and holidays.