Generally, all Veterans using the VA Home Loan Guaranty benefit must pay a funding fee. This reduces the loan's cost to taxpayers considering that a VA loan requires no down payment and has no monthly mortgage insurance. The funding fee is a percentage of the loan amount which varies based on the type of loan and your military category, if you are a first-time or subsequent loan user, and whether you make a down payment. You have the option to finance the VA funding fee or pay it in cash, but the funding fee must be paid at closing time.
You do not have to pay the fee if you are a:
The funding fee for second time users who do not make a down payment is slightly higher. Also, National Guard and Reserve Veterans pay a slightly higher funding fee percentage. To determine your exact percentage, please review the latest funding fee chart.
You may be entitled to a refund of the VA funding fee, if you had a disability compensation claim pending at the time of loan closing and were later awarded service connected disability compensation. The effective date of the disability compensation must be retroactive to a date prior to the date of loan closing.
If you feel that you are entitled to a refund of the VA funding fee, please contact your mortgage holder or VA Regional Loan Center at (877) 827-3702 to request a refund.
Be aware that the lender charges interest, in addition to closing fees and charges. Here are some general rules:
Adding the VA Funding Fee and other loans costs to your loan may result in a situation in which you owe more than the fair market value of the house, and will reduce the benefit of refinancing since your payment will not be lowered as much as it could be. Also, you could have difficulty selling the house for enough to pay off your loan balance.
PDF Documents — To read PDF documents, you need a PDF viewer. Links to viewer software can be found at this link.