The VA funding fee is required by law. The fee, currently 2.15% on no down payment loans for a first-time user, is intended to enable the veteran who obtains a VA home loan to contribute towards the cost of this benefit, thereby reducing the cost to taxpayers. The funding fee for second-time users who do not make a down payment is 3.3%. The idea of a higher fee for second-time user is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment.
For purchase and construction loans, members of the regular military fall into the category of first time user or subsequent user. For first-time users, with no down payment requires a 2.15% fee, with a down payment of at least 5 percent but less than 10 percent requires a 1.5% fee, and with a down payment of 10% or more requires a 1.25% fee. For subsequent users, no down payment requires a 3.3% fee, with down payment of at least 5 percent but less than 10 percent requires a 1.5% fee, and with a down payment of 10% or more requires a 1.25% fee.
For the category of Reserves / National Guard, first-time users with no down payment requires a 2.4% fee, with a down payment of at least 5 percent but less than 10 percent requires a 1.75% fee, and with a down payment of 10% or more requires a 1.5% fee. For subsequent users for the category of Reserves / National Guard, no down payment requires a 3.3% fee, with a down payment of at least 5 percent but less than 10 percent requires a 1.75% fee, and with a down payment of 10% or more requires a 1.5% fee.
Cash-out refinancing loans for regular military require a 2.15% fee for first-time users and a 3.3% fee for subsequent users. For Reserves / National Guard, the requirement is a 2.4% fee for first-time users and a 3.3% fee for subsequent users. If there are down payments involved, refer to the information above. On interest rate reduction loans, the VA funding fee is .50% and it is 1.0% on Manufactured Home Loans.
The following persons are generally exempt from paying the funding fee: