It's common knowledge among vets, active duty service members and their families that the Department of Veterans Affairs offers VA home loans. What's not so common knowledge is how the government pays for it all and how VA borrowers contribute to the program.
VA loans are paid for in part by taxpayer dollars, but also by the VA funding fee borrowers are required to pay in addition to closing costs and other expenses related to buying a home.
One of the first questions a VA mortgage applicant needs answered once they learn about the fee is how much they have to pay and when it must be paid. There is no one-size-fits-all answer or flat rate when it comes to VA funding fee amounts. The amount of the fee varies depending on a few factors including how much of a down payment is made on the VA mortgage, and the disability status of the applicant.
Did you know the VA doesn't charge funding fees in all cases? Those who have circumstances that match a list of VA-approved situations may find themselves exempt from having to pay this fee, which can be as much as 3.6% of the total loan amount in some cases. Who is exempt from paying the funding fee on their VA mortgage? According to the VA:
The existence of these situations that exempt the borrower from paying the VA funding fee aren't' enough. The VA requires the following documentation and paperwork:
For surviving spouses, the VA requires a Certificate of Eligibility that shows the borrower is entitled as an unmarried surviving spouse. Once this paperwork has been submitted to the Department of Veterans Affairs and is approved by the VA, the lender is notified that the borrower does not have to pay the VA loan funding fee.