Points About Va Home Loan And Funding Fees

By Author: Virendra Smith
Total Articles: 42
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A VA home loan is a type of mortgage loan guaranteed by the US Department of Veterans Affairs (VA). This loan was designed to help American veterans and service men as well as the surviving spouses, for as long as the latter do not remarry. It is generally offered by qualified lenders although out the United States.
The very basic intent of the loan is to supply long term financing to eligible individuals and to aid them in purchasing properties by foregoing down payments. This type of loan is made available in areas where private financing is not generally available. These places are called eligible areas and are usually rural districts including small towns and cities that are far from metropolitan zones.

On Funding Fees

One of the VA home loan requirements is the payment of funding fees, which may be paid in cash or included in the loan amount. This is a one-time fee charged on the loan availed of and is considered to be the loan’s salient feature. The fee is paid directly to the Department of Veteran’ Affairs and is the rationale why the ...
... VA can guarantee the no-money-down loan program. This was put in place to limit the overall cost of the loan and for borrowers to enjoy benefits like non-payment of down financing or monthly mortgage insurance. The funding fee is non-refundable yet borrowers do not have to pay it prior to the closing of the loan. It can be refinanced into the loan, which is most common among the VA borrowers.

Funding Fees Applicable Rates

The funding fees, as provided for under the law, usually range from 2.15 per cent to 3.3 per cent of the loan amount on purchases. On the other hand, 0.5 per cent to 3.3 per cent of the amount is charged for VA loans refinance. The fee is a way for borrowers to contribute to the cost of this benefit thus reducing the amount being shouldered by the taxpayers. Second time borrowers are usually required to pay higher fees since they already had the chance to avail of the benefit once. They also had the opportunity to amass equity or save money towards down payment.

Exemption from Payment of Funding Fees

The payment of funding fees cannot be discounted. However, there are situations where a borrower may be exempt from paying this fee regardless of a first or subsequent use of the VA loan. One of those eligible for exemption is veterans receiving VA compensation for service-connected disabilities. If a veteran has already paid the corresponding fee but was subsequently awarded disability compensation, the said veteran may apply for a refund. There is a caveat though: the beginning date of the disability must be prior to the closing date of the home mortgage. Also exempt are veterans who would be eligible to receive compensation for service-connected disabilities if they have not received their retirement pay. Finally, spouses of veterans who died in service or from service-connected disabilities may also be exempted.