Understanding Funding Fees
Pay it Upfront and be Done!
The VA doesn't charge any monthly premiums to their borrowers; they do however, have a one time, upfront fee that is applied to all of their loans issued to non-disabled veterans. This cost is financed into the loan and does not consume any of the veteran's useable equity in the transaction, but it will effect the overall loan amount and monthly payment.
Breaking down the costs
The amount charged by the VA (shown in "VA Funding Fee Costs" chart) will vary depending on the purpose of the loan, amount of previous VA loans, and VA disability status. See 'VA Funding Fee Costs' chart for further detail.
This funding fee perpetuates the program and is what allows past, present, and future veterans to take advantage of the great options the VA offers.
Putting it into Perspective
While on larger loan amounts the VA funding fee can be over $10,000, it actually has a relatively small effect on the monthly payments. The "Payment Effects" chart breaks down the approximate payment change caused by a funding fee of 3.3%
Remember - this fee does increase your loan amount - consult with your loan expert about recuperation time and make sure it lines up with your plans for the home!