Know how funding-fee status changes the VA loan before comparing payments.

The VA funding fee is a one-time program fee for many VA-backed transactions. Exemptions may apply to certain veterans, service members, and surviving spouses, and the applicable amount can depend on transaction type, prior use, and in some purchase cases the down payment.

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VA Home Loans Eligibility Entitlement Funding Fee Purchase Refinance IRRRL Cash-Out California Veteran Homebuyer Military Homebuyer

Possible exemptions

Certain borrowers receiving or eligible for qualifying VA disability compensation, certain surviving spouses, certain pre-discharge claimants, and some Purple Heart recipients may qualify for an exemption under VA rules.

First vs. subsequent use

Prior use of the VA benefit can affect the funding-fee percentage for certain transactions.

Down payment

For eligible purchase transactions, the amount of down payment can affect the funding-fee percentage.

Financing the fee

In many VA transactions the funding fee may be financed into the loan rather than paid entirely in cash at closing.

No conventional monthly PMI

The funding fee is not the same as conventional monthly private mortgage insurance. VA-backed loans generally do not use conventional monthly PMI.

Closing-cost distinction

Financing the funding fee does not mean all purchase closing costs can be financed. Closing costs, prepaids, credits, and cash to close should be modeled separately.

Put the concept in context

The funding fee should be part of the before-and-after analysis, not a surprise at closing.

For an exempt borrower, the payment and cash comparison may look different. For a non-exempt borrower, decide whether the fee will be paid in cash or financed and understand how that choice affects the new loan balance.

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