Summary: The excitement of a new home purchase can sometimes override wisdom and prudence when…
Summary: Borrowers in Washington and Oregon who use the VA loan program typically have to pay a funding fee. For borrowers who choose not to make a down payment, this fee typically ranges from 2.15% to 3.3% of the loan amount. For many home buyers, the advantage of having no down payment more than makes up for the funding fee cost.
VA Funding Fees in Washington & Oregon
VA loans are a popular mortgage product among military folks in Washington State and Oregon (our primary areas of operation). This program offers several key advantages, such as having no down payment or mortgage insurance.
VA loans are unique in that they receive government backing. In short, the federal government guarantees these loans. This guarantee gives lenders an added layer of protection from losses related to borrower default. It also allows eligible home buyers in Washington and Oregon to buy a house with no money down.
There is a funding fee associated with the VA loan program. This fee is partly what enables the program to exist in the first place.
As it states on the Department of Veterans Affairs website:
“Generally, all Veterans using the VA Home Loan Guaranty benefit must pay a funding fee. This reduces the cost to taxpayers considering that a VA loan requires no down payment and has no monthly mortgage insurance. The funding fee is a percentage of the loan amount which varies…”
Fees Can Vary Based on Several Factors
So, how much is the VA funding fee in Washington and Oregon? As mentioned above, the size of the funding fee will vary based on several factors. These factors include:
- The borrower’s military category (active duty, National Guard, or reserves)
- Whether or not you’re making a down payment
- Whether or not you’ve used a VA loan in the past
For most borrowers who use the VA loan program in Washington and Oregon, the VA funding fee ranges from 2.15% to 3.3% of the loan amount. This is when the borrower makes no down payment (one of the advantages of the program). Borrowers who choose to make a down payment of some kind typically pay a lower funding fee, as low as 1.25% in some cases.
Generally speaking, there’s a lower fee for people who are using the program for the first time and a higher one for subsequent use.
Some Borrowers Don’t Have to Pay It
As mentioned above, most home buyers in Washington and Oregon who use the VA loan program have to pay a funding fee. But there are some instances where the fee is not required.
According to official program guidelines, you may not have to pay it if you are…
- a veteran who is currently receiving VA compensation for a service-related disability; OR
- a veteran who would be entitled to receive compensation for a disability if you did not receive retirement or active duty pay; OR
- a surviving spouse of a veteran who died in service, or from a service-connected disability.
It Can Be ‘Rolled’ Into the VA Loan
Washington and Oregon home buyers who use a VA loan can either finance the funding fee or pay it in cash. The Department of Veterans Affairs states as much on their website: “You [the borrower] have the option to finance the VA funding fee or pay it in cash, but the funding fee must be paid at closing time.”
Many borrowers choose to “roll” the funding fee into the loan. That is, they choose to combine the fee with the actual loan amount being borrowed, and finance the total amount over the long term. This prevents the borrower from having to pay it out of pocket. Others choose to pay the fee upfront, so it doesn’t increase their monthly payments.
Have Questions or Need a VA Home Loan?
We are passionate about the VA loan program because it rewards our brave men and women in uniform. It’s one of our areas of expertise. We currently have been lending in the Pacific NW Since 1992, including Washington, Oregon, Colorado, and Idaho. Please contact us if you have questions about using this mortgage program.