Real Estate Term of the Day: Funding Fee

Real Estate Term of the Day: Funding Fee

FUNDING FEE (VA) – a nominal fee charged by the Veterans Benefits Administration to those receiving a MORTGAGE guaranteed by the administration (Barron’s Dictionary of Real Estate Terms) 

This is a great article that I found regarding VA eligibility requirements:

What are the Eligibility Requirements

In order to be eligible for a VA loan, the borrower must be active duty personnel in the United States military or a Veteran.

Non-veterans are not eligible borrowers on VA loans unless they are the spouse of an eligible veteran.

To determine eligibility the veteran would need to obtain a Certificate of Eligibility.  In order to qualify to receive the certificate of eligibility the borrower must meet the requirements below.

  • Active-duty veterans discharged during WWII or later, without a “dishonorable” discharge.
  • Active-duty veterans with at least 90 consecutive days of service during major conflict.
  • Peacetime veterans and active duty personnel with at least 180 days of consecutive service.
  • Enlisted veterans who entered the military after 1980 or officers who entered the military after 1981 and who have served at least 2 years.

The Certificate of Eligibility lets the lender know that:

  • The veteran is eligible for a VA home loan,
  • How many times (if any) the veteran has used that eligibility which will affect the VA funding fee, and
  • Up to what amount the VA will insure the loan.

VA Loan Funding Fee

VA Loans do not have mortgage insurance like FHA loans, but they do have an upfront funding fee that can be added to the loan amount.

The funding fee is a percentage of the loan amount and is determined by what type of veteran the borrower is, how much of a down payment they have, and if the veteran has used a VA loan in the past.

Please refer to the table below: