VA Funding Fee

VA Funding Fee Explained

The VA funding fee is a one-time payment on VA-backed or direct home loans to offset the cost to taxpayers. It varies by loan type, down payment, and usage frequency. Veterans with service-connected disabilities are exempt as well as Surviving Spouses. The VA funding fee can be financed into the loan or paid out of pocket at the time of closing.

2024 VA Funding Fee Chart – Effective change occurred April 7, 2023

Type of VA LoanDown PaymentFirst-Time UseSubsequent Use
 5% to 9.99%1.5%1.5%
 10% or more1.25%1.25%
Cash-Out RefinanceN/A2.15%3.3%
IRRRL (Streamline Refinance)N/A0.50%0.50%

To calculate the exact amount of the VA funding fee:

  • Determine the base loan amount.
  • Identify the applicable funding fee percentage based on the factors above.
  • Multiply the loan amount by the funding fee percentage.

This fee can be paid upfront at closing or financed into the loan amount, allowing the borrower to spread the cost over the life of the loan.

Assuming the VA funding fee chart maintains the same rate for a purchase with subsequent use and no down payment; here’s how the calculation would work for a purchase loan:

VA Funding Fee Calculation Example:

  • Sales Price: $250,000
  • Type of VA Loan: VA Purchase
  • Down Payment: $0 (no money down)
  • Previous VA Loan Use: Yes (subsequent use)
  • VA Funding Fee Rate: 3.3% (see chart above)
  • Funding Fee Calculation: $250,000 (loan amount) × 3.3% (VA funding fee rate) = $8,250

Thus, for a $250,000 VA home purchase loan in 2024, with no down payment and it being a subsequent use of the VA loan benefit, the funding fee would be $8,250. This amount can be financed along with the loan, allowing the borrower to add it to the total loan amount instead of paying it out of pocket at closing.

When are you exempt from the VA funding fee?
You are exempt from the VA funding fee under several circumstances, primarily related to service-related conditions and entitlements. Here are the key situations where a borrower would not be required to pay the VA funding fee:

  • Service-Connected Disabilities: Veterans receiving VA compensation for disabilities related to their service are exempt from the funding fee.
  • Purple Heart Recipients: Active duty service members who have been awarded the Purple Heart are exempt.
  • Surviving Spouses: Unremarried spouses of Veterans who died in service or from service-connected disabilities, and who are using the VA home loan benefit, are exempt.
  • Service-Connected Discharge: Veterans who are eligible to receive VA compensation as a result of a pre-discharge exam or review, but who are not receiving retirement or active service pay instead, are also exempt.

These exemptions are designed to relieve financial burdens on those who have sacrificed or suffered as a result of their service. To confirm your eligibility for an exemption, you should consult with the VA or a VA-approved lender, as they can help you obtain the necessary documentation and navigate the application process for the VA home loan and funding fee exemption.

Can you ever receive a refund for the VA funding fee?
Yes. Veterans who’ve paid a VA funding fee on their home loan might be eligible for a refund under certain conditions, such as receiving disability compensation after closing or being charged the fee in error. This overview explains the circumstances that may qualify you for a refund, highlighting the importance of understanding your rights and the steps to claim any refunds due. Learn more details below regarding a VA Funding Fee Refund.

VA Funding Fee Refunds: A Quick Guide

This guide simplifies when veterans might qualify for a refund of the VA funding fee. This fee, essential to the VA home loan process, is a one-time charge designed to reduce the loan’s cost for taxpayers. Certain conditions allow for this fee to be refunded.

About the VA Funding Fee
Charged on VA home loans, the funding fee varies by loan details, military service, and down payment size. Notably, veterans with VA disability compensation and specific other groups may not be required to pay this fee at all.

Situations That May Qualify for a Refund:

  • Disability Compensation Awarded After Loan Closing: If you’re awarded disability compensation by the VA after your loan closes and the disability is retroactively dated to before the closing of your VA loan, you may be eligible for a refund of the funding fee. 
  • Incorrect Fee Charged: If an error was made in calculating your funding fee (for example, you were charged as a subsequent user instead of a first-time user) or if you were eligible for an exemption at the time of loan closing but were charged the fee, you may receive a refund.
  • Active Duty Service Members Awarded the Purple Heart: As of January 1, 2020, active duty service members who have been awarded the Purple Heart are exempt from the funding fee. If you closed on your loan after receiving the Purple Heart but were charged the funding fee, you’re eligible for a refund. 

How to Apply for a VA Funding Fee Refund
To initiate the refund process, follow these steps:

  • Gather Documentation: Compile any relevant documents that prove your eligibility for the funding fee refund, such as your disability award letter from the VA or your Purple Heart award documentation.
  • Contact Your Lender: Inform your lender of your situation and provide them with the necessary documentation. Your lender will then review your case and work with the VA to process the refund.
  • VA Review: The VA will review the provided documentation, verify your eligibility for a refund, and process the refund accordingly.

Timing of the Refund

  • Direct to Lender: If your VA home loan is still active, the refund may be applied directly to the balance of your loan unless you request otherwise.
  • Direct Payment: If your loan has been paid off, you will receive a direct payment of the refund amount.

Important Considerations

  • Interest: No interest is paid on funding fee refunds.
  • Processing Time: The time it takes to process a refund can vary.
  • Documentation: Keeping detailed records and promptly providing all requested documentation will help ensure a smoother refund process.

Veterans who believe they may be eligible for a VA funding fee refund should contact the VA for assistance. The VA Regional Loan Center can be reached at 877-827-3702.

Whether due to a change in disability status, an administrative error, or receiving a Purple Heart, understanding your rights and the refund process can potentially save you thousands of dollars.

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