VA HOME LOAN: the Truth behind the Funding Fee

The VA funding fee is required by law. The fee, currently 2.15% on no down payment loans for a first-time use, is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce 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 use 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, no down payment requires a 2.15% fee, up to 10% down payment requires a 1.5% fee, and 10% or more requires a 1.25% fee.

For subsequent users, no down payment requires a 3.3% fee, up to 10% down payment requires a 1.50% fee, and 10% or more requires a 1.25% fee.

Can the VA Funding Fee be used as a tax write-off?
No... but it adjusts the cost basis upward, so if the sale of the property is taxable, then it would reduce the gain and therefore the tax.

Happy House Hunting!
~Blalock & Associates

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