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Affinity Title

MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

Home Buying Steps

  • Getting Started
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image

VA LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. What Is a VA Loan Funding Fee?

MORTGAGE

What Is a VA Loan Funding Fee?

What you'll learn: The basics involved with a VA loan like funding fees

EXPECTED READ TIME:3 MINUTES

Updated April 7, 2023

What is a VA loan?

VA loans were developed to encourage and allow more eligible veterans and service members to achieve the American dream of buying a home. VA loans are government-backed loans that offer highly competitive interest rates and require little to no down payment.

What Is a VA loan funding fee?

A funding fee is a one-time payment that helps lower the cost of a loan for U.S. taxpayers and can either be paid up front or rolled into the cost of the loan.  Even though VA loans have funding fees, you’ll likely find the benefits of a VA loan outweigh the cost of the fee.

How much is a VA funding fee?

Assuming you’re eligible for a VA loan, there are three key factors that determine your VA funding fee:

  • Whether you have ever had a VA-backed loan before — if so, a new VA loan is often referred to as "subsequent use”
  • How much money you are using for a down payment
  • The total amount you are borrowing

You may be thinking, “Wait a minute, VA loans don't require a down payment!” That's correct, but whether or not you put money down, and how much you put down, helps to determine your funding fee.

If you've never used a VA Loan before, then the funding fee for a home purchase (not for refinancing) is determined as follows:

  • If your down payment is less than 5%, your funding fee would be 2.15% of the loan.
  • If your down payment is 5% or more, your funding fee would be 1.5% of the loan.
  • If your down payment is 10% or more, your funding fee would be 1.25% of the loan.

Here is an example for you to follow if you have a home purchase price of $250,000:

  • With a down payment of $0, your funding fee would be $5,375 which may be rolled into your overall loan.
  • With a down payment of 7% ($17,500), your funding fee would be 1.5% of the loan amount, or $3,750.

Here are the 2023 fee percentages for someone who has already used a VA Loan benefit (subsequent use):

  • With a down payment less than 5%, the subsequent use funding fee is 3.3% of the loan.
  • With a down payment more than 5%, the subsequent use funding fee is 1.5% of the loan.
  • With a down payment more than 10%, the subsequent use funding fee is 1.25% of the loan.

Are funding fees the same as closing costs?

The short answer is no, because a VA loan funding fee could be one of the costs required during closing if you haven't rolled the fee into your mortgage. Typical closing costs usually include things like lender fees, appraisal costs, property taxes, and discount points.

Are there any exemptions to funding fees?

You may be exempt from a VA loan funding fee if you meet one of the following criteria:

  • Entitled to or receiving compensation for a service-related disability
  • Active-duty service member who has received a purple heart
  • A spouse of a veteran who died while serving or through a service-related disability

Is there a VA funding fee if I refinance?

There are two types of VA loan refinancing options. One is an Interest Rate Reduction Refinance Loan (IRRRL) and the other is a cash-out refinance.

The good news is that it doesn't matter how many times you've used the VA loan program, your IRRRL rate is a flat 0.5% of the amount you borrow unless you are exempt. Cash-out refinance funding fees, however, are similar to VA purchase funding fees listed above. Note that you can't game the system by getting a cash-out refinance to lower funding fees.

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

Can I Refinance a VA Loan?

A VA loan can improve your financial situation, especially when it’s time to refinance your home. PenFed explains how to approach the VA refinance process and your best options.
service member discussing refinancing a mortgage

What Is an IRRRL?

How do you refinance a VA loan? PenFed Credit Union examines interest rate reduction refinancing (IRRRL) loans and explains the benefits to borrowers.
american flag with keys to home

10 Reasons Why You Should Get a VA Loan

The benefits of a VA loan can be a great option for military families and veterans. Learn about the reasons why you should get a VA loan from PenFed Credit Union.
military personnel being handed keys to new home

What Are the Pros and Cons of VA Loans?

VA loans can be beneficial because of low interest rates, no mortgage insurance requirements, and little to no down payment. PenFed helps you understand the pros and cons of VA loans.
child with American flag running up steps of home
image

VA LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

VA Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of September 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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Routing #256078446

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The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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