Congress is trying to “beef up” military benefits, and they started by lowering the Veteran Home Loan fee for getting a VA Mortgage Loan. The Fee, called a funding fee, is VA’s version of PMI.
It’s important to remember that the Veteran’s Administration doesn’t actually MAKE mortgage loans for Veteran’s, they only insure them. The Guarantee Fee covers the default charges the Veteran’s Administration might face if the homeowner goes into foreclosure.Congress passed H.R. 1383, the Restoring GI Bill Fairness Act of 2011, and with that, the Guarantee Fee on mortgage loans for Veterans will be a little cheaper. The VA Funding Fees was reduced effective October 1st. This was important, because in some parts of the country, Veteran’s who are relocating are not seeing much equity that they can take with them to their new post.
On a VA Loan, the Guaranteed Funding Fee is charged at loan closing, and is generally added to the loan amount. If you are purchasing a $100,000 home and you have not used your entitlement before, you loan amount will be $102,150. You don’t have to finance in the Guarantee Fee, though. It can be paid through seller contributions, lender credits, or added back to the Veterans loan amount.
Since most Veteran home loans are funded with no money invested for a downpayment, the Funding Fee on those VA loans will be lowered from 3.3% to 2.15%. This reduction is for those Veteran’s that are first-time users of their entitlement and who are on active duty or honorably discharged.
- A basic funding fee of 2.15 percent must be paid to VA by all but certain exempt veterans. A down payment of 5 percent or more will reduce the fee to 1.5 percent and a 10 percent down payment will reduce it to 1.25 percent.
- A funding fee of 2.40 percent must be paid by all eligible Reserve/National Guard individuals. A down payment of 5 percent or more will reduce the fee to 1.75 percent and a 10 percent down payment will reduce it to 1.50 percent.
- The funding fee for loans to refinance an existing VA home loan with a new VA home loan to lower the existing interest rate is 0.5 percent.
- Veterans who are using entitlement for a second or subsequent time who do not make a down payment of at least 5 percent are charged a funding fee of 3.3 percent. A down payment of 5 percent or more will reduce the fee to 1.50 percent and a 10 percent down payment will reduce it to 1.25 percent.
- VA Loans for Disabled Vets have different Fees, check this out.
Loans for Veterans are one of the last true remaining “no money down” mortgage loan programs in the marketplace. FHA and USDA are now charging monthly fees in addition the the money collected upfront – so this reduction in the funding fee for Veterans should provide a significant money saving benefit to returning service members.
Congress is also hoping that since mortgage rates are so very low, this move will motivate some Veterans who have been waiting to purchase a home! If you have questions about your VA Eligibility Benefits – please call Steve and Eleanor Thorne, Mortgage Banker in Cary – we offer the lowest mortgage rates for homes in NC! 919-649-5058