Lower Financing Fee on VA Mortgage Loans

Lower Financing Fees on VA Mortgage Loans

Effective Oct. 1, 2011 the funding fee associated with VA mortgage loans will be reduced. This is one of those great pieces of news that is going to be welcomed with excitement by all eligible veterans. The funding fee is a type of insurance the government charges to insure VA mortgages by adding the cost to the loan amount. This tacked on funding fee is thereby financed as part of the loan.  VA mortgages are bundled and sold on the secondary market with the backing of the Federal Government.

By reducing the funding fee, this effectively lowers the monthly cost because the overall loan amount is reduced. Then, when the house is later sold the total funds paid back is also less.  This is a huge benefit for the veteran and should boost housing affordability.

Breakdown of VA Funding Fee Changes:

  • Funding fees for loans with First time use of VA entitlement for Veteran/Active  duty and Reservist/National Guard service will decrease .75% for all down payment tier levels.
  • Funding fees for loans with Second and Subsequent use of VA entitlement for Veteran/Active Duty and Reservist/National Guard service will decrease .50% for less than 5% down payment on purchase transaction and cash-out refinance transactions.
  • Funding fees for loans with Second and Subsequent use of VA entitlement for Veteran/Active Duty and Reservist/National Guard service will decrease .75% for the more than 5% and more than 10% down payment tiers on purchase transactions.
  • Funding fees for Interest Rate Reduction Refinancing Loans and Assumptions will not change. They will remain at .50%VA-Funding-Fee-Grid.png

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