Calculating Your VA Funding Fee

If you are in the armed forces, are a veteran or are the spouse of a military member or veteran and are purchasing a home through the VA home loan program, you will be responsible for a VA funding fee. The VA home loan program works to guaranty the loan should you default on it. The VA program does not require private mortgage insurance or a down payment; however, by law, the program must assess the funding fee to allow the purchaser to contribute towards the purchase of the home. In addition, the funding fee reduces the amount being passed on to taxpayers. The VA funding fee is charged one time, is nonrefundable and varies depending on the type of transaction. The funding fee varies depending on the specific circumstances of the applicant. The numbers used below are a guide and are the range within which funding fees are normally based (figures are current in June 2010).

Purchases

If you are purchasing your first home using the VA home loan program and you are in the military, then your down payment will determine what your funding fee will be. Most first-time funding fee rates range from 1.25 to 2.15 percent. If you are not making a down payment, then you can anticipate that your funding fee will be 2.15 percent. The fee is higher because there are no monies being applied towards the purchase. If you have a down payment that is 5 percent or more, then your funding fee will range from 1.25 to 1.50 percent. For additional home purchases using the VA home loan program, the funding fee will be higher. The funding fee for subsequent purchases will range from 1.25 to 3.30 percent. The rates for Reserves and National Guard members are different due to the amount of time served. First-time program users in the Reserves and National Guard are assessed a funding fee rate ranging from 1.50 to 2.40 percent. If it is for an additional purchase, the funding fee ranges from 1.50 to 3.30 percent.

Refinancing and Other Transactions

For military and reserve personnel doing a cash out refinancing, the funding rates are set. For military personnel doing cash out refinances, the funding fee is 2.15 percent initially and 3.30 percent for any refinancing thereafter. As with purchases, Reserves and National Guard personnel are assessed a higher fee rate. The funding fee for a first-time cash out refinance is 2.40 and 3.30 percent thereafter. The VA funding fee is also assessed towards other transactions, such as a loan assumption or an interest rate reduction. These specifically mentioned loans are assessed a .5 percent funding fee, whether you are a member of the regular military or the Reserves.

Calculating

Now that you have an idea of what your possible funding fee will be, you can calculate how much the fee will actually cost. To calculate what your actual cost is, multiply the funding fee by your loan amount. The total will give you the actual mortgage. For example, if your loan amount is $150,000.00 and your funding fee is 2.15 percent, you would multiply the two. Your total would be $153,225.00. Your funding fee is represented by the $3,225.00.

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