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Can the VA funding fee be financed?

Veteran with familyDid you know that the Veteran's Administration waives the VA funding fee for veterans who receive disability compensation or have a disability rating of 10% or higher? And, as of January 1, 2020, Purple Heart recipients also qualify to receive a VA funding fee exemption when obtaining a VA home loan.

The cost of the funding fee depends on the down payment and whether the veteran is using the VA loan program for the first time or if the vet is reusing the VA loan program.

According to the VA:
You will not have to pay a VA funding fee if any of the below descriptions is true:

  • A service member on active duty who before or on the loan closing date provides evidence of having received the Purple Heart
  • A service member with a proposed or memorandum rating, before the loan closing date, saying you're eligible to get compensation because of a pre-discharge claim, or
  • Eligible to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead, or
  • Receiving VA compensation for a service-connected disability, or
  • The surviving spouse of a Veteran who died in service or from a service-connected disability, or who was totally disabled, and you're receiving Dependency and Indemnity Compensation (DIC)

SOURCE: U.S. Department of Veterans Affairs

Here's a chart of the "new VA funding fee" percentages as of January 1, 2020. You can calculate the VA funding fee with the VA loan calculator.

VA funding fee schedule as of 2020

VA funding fee rate chart for purchase

VA funding-fee for refinance

How to calculate the VA funding fee

Sales Price = $100,000
Less down payment (if zero) = $0
Loan Amount = $100,000.00

Now multiply the mortgage amount by the VA funding fee percentage. For this example, we'll assume zero down payment and the veteran earned his or her eligibility as an active duty (regular military) veteran; and no down payment. Multiply the mortgage amount X funding fee percentage:

Loan Amount = $100,000
X VA funding fee percentage 2.30% $2,300.00
Final Loan Amount = $102,300.00

The funding fee is financed into the mortgage amount (or you can pay the fee in cash).

You're mortgage payment will be based on the Final Loan Amount of $102,300

Frequently asked questions about the VA funding fee

Q. Am I exempt from the VA funding fee?
The lender completes Form 26-8937 to confirm any disability payments you are receiving. The form is sent to the VA for verification.

The certificate of eligibility (COE) can indicate the funding fee waiver status and display the monthly VA disability compensation amount. Upon receiving a COE with a funding fee “exempt” status, the lender will take off the funding fee from the VA loan closing costs

Q. Can a VA funding fee be financed
The funding fee is typically financed

Q. Do I have to pay a VA funding fee?
Every veteran and other eligible applicants are required to pay the funding fee, unless the applicant(s) meets the one of the funding fee waivers.

Q. Why is there a VA funding fee?
The funding fee is used to support the VA loan program and reimburse lenders for bad loans