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The VA Home Loan program is without a doubt the best mortgage on the planet. Setting aside for a moment that this is a benefit afforded to those who have served our country in the military, there are other benefits that set this loan program apart from all others.
There is the matter of the VA Funding Fee, however. This is a fee that is added to the loan as part of the guarantee. It is not an out-of-pocket cost, however. If a veteran buyer is getting a $400,000 loan, he or she will have a 2.15% funding fee added to the loan for the first use of the program. That means that the actual loan amount would be $408,600.
The funding fee changes for subsequent uses of the VA loan: using it a second time, the funding fee goes up to 3.3%—that means $13,200 added to the base $400,000 loan. It’s still a good deal—just a more expensive deal.There is a helpful loophole, though: if you make a down payment of at least 5%, the funding fee drops to just 1.5%. That can save a great deal of money for a veteran using the program for the second or third time. For that same $400,000 purchase, making a down payment of just $20,000 would drop the funding fee to $6,000 from $13,200. That’s a reduction of $7,200.
If the purchase price is $500,000 and the county limit is $417,000, the buyer would pay 25% of the $83,000 difference between $500,000 and $417,000—$20,750. The VA would guarantee a loan of $479,250. But it would make economic sense to make a larger down payment—$25,000 instead of the required $20,750. That would reduce the funding fee to 1.5%, saving nearly $7,000.
One last thing bears mentioning. For our veterans who have any sort of service-connected disability and for which they receive compensation from the VA—even as little as a 10% disability—the VA funding fee is waived entirely.
To all our veterans, wherever and whenever they served, we owe our respect and gratitude.
If you’re ready to apply for a VA loan or any other type of mortgage product, click the button below to start now.
At Sammamish Mortgage, we are pleased to offer many different mortgage programs to borrowers in Washington State, as well as the rest of the Pacific Northwest region, including Idaho, Colorado, and Oregon. We are a family-run business local to Bellevue, Washington, and work hard to help borrowers become homeowners. Contact us today if you have questions about applying for any type of mortgage product.
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