Veterans Administration (VA) home loans are a great. Unlike most other Americans, active duty servicemembers and veterans, can purchase a home without a down payment. But where the government giveth, the government can taketh away. If you decide to use a VA loan to purchase a house you will have to pay a funding fee. The funding fee varies based on whether you are active duty or a veteran, how many times you have used a VA loan in the past and the amount you put down on the house.
Here are some examples (all are $0 down)
- Active duty first time use = 2.15%
- Active duty subsequent use = 3.3%
- National Guard/Reserves first time = 2.4%
- National Guard/Reserves subsequent use = 3.3%
- Regular Military Veteran first time use = 2.15%
- Reserve/National Guard Veteran first time use = 2.4%
- Regular Military Veteran subsequent use = 3.3%
- Reserve/National Guard Veteran subsequent use = 3.3%
There are of course, exceptions. Some exceptions include manufactured homes and refinances.
VA Funding Fee Doesn’t Always Apply
There are certain times when the VA funding fee doesn’t apply. There are three times this is true.
- A Veteran is receiving compensation for a service-connected disability
- Veteran who is entitled to disability compensation but does not receive it due to receiving retirement or active duty pay (haven’t run into this one)
- Surviving spouse of deceased active duty servicmember or a Veteran who died from a service connected disability.
A problem many retiring senior military officers and NCOs run into is they need to purchase a house and they’re still waiting for the VA to determine whether they will receive compensation for a service-connected disability. If this is the case for you, you will have to pay the funding fee. But, there is good news. If you have a disability compensation claim pending at the time of the loan closing and later receive awarded service connected disability compensation, the funding fee will be refunded. The effective date of the rating must be retroactive to a date prior to the date of closing.
How Do I Get My VA Funding Fee Back?
You can pay the VA funding fee in cash or you can include it in the balance of the loan. The choice is up to you and your bank. To get the VA funding fee back, once your VA claim is adjudicated and you find you meet the criteria to get the funding fee refunded, you should contact your lender or the VA Regional Loan Center (877-827-3702) and tell them you would like the funding fee refunded. I think I’d contact them both.
This part is pretty cool…effective 1 Jul 19, the funding fee will be refunded to you, even if you chose to have the funding fee included in your loan balance. You can chose to keep the refund or use it to pay down the principal on the loan.
Veteran Finances are Different
Veterans are not the same as civilians and their finances are different too. If you decide to work with a financial advisor or planner, make sure he or she is well versed in military and veterans benefits.
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