Introduction

The VA funding fee is a one-time payment that helps sustain the VA loan program, making it available for future generations of veterans. While it’s an essential part of most VA loans, many veterans and service members qualify for exemptions that can save thousands of dollars. In this post, we’ll explain what the VA funding fee is, who qualifies for an exemption, and how you can ensure your exemption is applied.

1. What Is the VA Funding Fee?

The VA funding fee is required on most VA loans to offset program costs. This fee ensures that the VA loan program remains self-sufficient and doesn’t require taxpayer funding.

Key Facts About the VA Funding Fee:

• The fee applies to both purchase and refinance loans.

• It varies based on your down payment, loan type, and whether you’ve used your VA loan benefits before.

• The fee can either be paid upfront or rolled into the loan amount to reduce immediate costs.

2. Who Qualifies for a VA Funding Fee Exemption?

Certain veterans and service members are exempt from paying the VA funding fee. You may qualify for an exemption if:

• You receive VA disability compensation for a service-connected disability.

• You are a surviving spouse of a veteran who died in service or from a service-connected disability.

• You are an active-duty service member with a Purple Heart.

Your Certificate of Eligibility (COE) will typically indicate whether you qualify for an exemption.

3. How to Claim Your VA Funding Fee Exemption

To ensure your exemption is applied correctly, follow these steps:

1. Verify Your Status: Check your COE to confirm that you qualify for an exemption.

2. Notify Your Lender: Inform your lender of your exemption status early in the process.

3. Provide Supporting Documents: Submit any necessary documentation, such as proof of VA disability compensation or Purple Heart status.

4. How Much Can You Save with an Exemption?

The VA funding fee can represent a significant cost, depending on the size of your loan. For example:

• On a $300,000 loan with no down payment, the first-use funding fee is $6,450.

• An exemption eliminates this fee, saving you thousands upfront or reducing your total loan amount if it’s rolled into your loan.

5. Why Is the VA Funding Fee Important?

The VA funding fee is vital to maintaining the long-term sustainability of the VA loan program. It helps:

• Ensure that future veterans and service members can access VA loans.

• Offset the cost of providing no down payment and competitive rates.

• Reduce the reliance on taxpayer funding for the program.

Even if you’re required to pay the funding fee, it’s still a small price for the significant benefits that VA loans offer, including no down payment and no private mortgage insurance (PMI).

Conclusion

Understanding the VA funding fee and whether you qualify for an exemption is key to making informed decisions about your VA loan. Exemptions can save you thousands, while the fee itself ensures the program continues to provide valuable benefits for veterans.

If you’re ready to start your VA loan journey or want to confirm your exemption status, contact Loan Squad today for expert guidance and personalized support.