The VA Home Loan Funding Fee is a crucial aspect of obtaining a mortgage through the U.S. Department of Veterans Affairs (VA). This fee helps to support the VA loan program and is required for most veterans, active-duty service members, and some surviving spouses. Understanding how to reduce this fee can lead to significant savings over the life of the loan. Here’s a comprehensive guide on how to effectively lower your VA Home Loan Funding Fee.
1. Understand the Funding Fee Structure
The VA Home Loan Funding Fee varies based on several factors including the type of loan, whether it’s your first VA loan, and your military service category. Typically, the fee ranges from 1.4% to 3.6% of the loan amount. Knowing the specifics of these percentages can help you calculate potential savings early on in the loan process.
2. Utilize the Exemptions
Some veterans and service members may qualify for a funding fee exemption. This includes those receiving VA disability compensation, individuals who have been awarded a Purple Heart, and surviving spouses of veterans who have died in service or from service-related disabilities. If you fall into any of these categories, make sure to apply for the exemption, as it can eliminate your funding fee completely.
3. Consider the Type of Loan
There are different types of VA loans, each with its associated funding fees. A purchase loan typically has a different fee than a final loan refinancing. If possible, consider refinancing options that might reduce your overall loan costs. Consulting with a VA-approved lender can provide insights into which loan type might incur a lower funding fee.
4. Make a Larger Down Payment
The amount of your down payment can also influence the funding fee. If you make a down payment of 5% or more on a VA loan, you might be eligible for a lower funding fee percentage. Evaluate your financial situation to determine if making a larger down payment is feasible, as it can lead to long-term savings.
5. Use a Funding Fee Refund
For veterans who have previously paid the funding fee and later became eligible for an exemption, it’s possible to receive a refund of the funding fee. Ensure you keep records of previous funding fee payments and check your eligibility for a refund. This financial relief can be reinvested into your home or used to pay down your mortgage faster.
6. Shop Around for Lenders
Different lenders may have varying fees and terms associated with VA home loans. It’s important to shop around and compare offers from multiple VA-approved lenders. Carefully assess each lender’s fees, including the funding fee, and look for competitive rates. An informed decision can help you save significantly.
7. Negotiate Closing Costs
In some cases, the seller may contribute to your closing costs, which could offset the funding fee and other closing expenses. During negotiations, consider asking the seller to cover your funding fee or other fees associated with the loan process. This can alleviate the financial burden and make your purchase more affordable.
8. Stay Updated on VA Loan Benefits
The VA continues to evolve and improve its loan programs. Staying informed about changes in policies, funding fee adjustments, or any new exemptions can make you a savvy borrower. Engage with VA resources or speak with a mortgage professional specializing in VA loans to ensure you’re taking advantage of all available options.
In conclusion, understanding the VA Home Loan Funding Fee and taking steps to reduce it can make a significant difference in your home buying experience. By utilizing exemptions, considering different loan types, and negotiating fees, veterans and service members can find financial relief and secure their dream home more affordably.
