Is the VA Funding Fee Worth it?

It depends on you. If you use a VA home loan, there is no monthly mortgage insurance required. So depending on how much you have to put down on your loan, the funding fee could end up being much less than the amount you would end up paying on mortgage insurance over the life of your loan.

Here is a chart to help you determine what your PMI (private mortgage insurance) rates would be. Use these numbers to help you choose whether your funding fee is worth it to you:

% Down Payment PMI Rate (30 yr mortg.) PMI Rate (10,15,20 yr mortg.)
80.01% - 85% .32 .19
85.01 - 90% .52 .23
90.01% - 95% .78 .26
95.01% - 97% .90 .79


Example: On a $150,000 loan, with a Down Payment of 5% on a 30 yr Fixed Mortgage:
$150,000 X .78%= $1170/yr in mortgage insurance

FYI: FHA loans require a 2.25% fee, AND mortgage insurance.. so consider this when choosing a loan


Happy House Hunting!
~Blalock & Associates

www.gohomesearching.com

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

www.gohomesearching.com