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Funding Fee
What Is a Funding Fee?
A funding fee is a one-time fee paid by borrowers using a VA loan.
It helps sustain the loan guarantee program backed by the U.S. Department of Veterans Affairs.
The funding fee replaces private mortgage insurance and reduces taxpayer burden.
Why It Matters in a Mortgage
Funding fees:
- Increase total loan cost
- Vary based on down payment and usage
- May be financed into the loan
First-time VA users often pay a lower percentage than repeat borrowers.
Some veterans are exempt from the funding fee due to disability status.
How It Works
Example:
- Loan Amount: $300,000
- Funding Fee: 2%
- Fee Amount: $6,000
The borrower can pay upfront or roll it into the mortgage balance.
Funding Fee vs. Guarantee Fee
Funding Fee → VA loans
Guarantee Fee → USDA loans
Both support government-backed guarantees.
FAQs About Funding Fees
Is the funding fee refundable?
Generally no.
Can it be waived?
Yes, for eligible exempt borrowers.
Does it affect monthly payment?
If financed, yes.
Related Terms
