If you’ve been exploring the possibilities of using your VA home loan eligibility to buy and finance a property in or around Alpharetta, Georgia, there are some benefits you may not be aware of. As you know, the primary benefit of a VA home loan is the lack of a down payment. It’s one of a very few home loan programs that don’t need a down payment whatsoever. As a bonus, the veteran is also restricted from paying certain types of closing costs, further reducing the amount of cash needed at the closing table. Finally, the loan comes with a guarantee to the lender should the loan go into default, which is very rare for a VA loan. When a VA loan does go into foreclosure, the lender is compensated at 25 percent of the loss. This guarantee is financed with a form of mortgage insurance referred to as the Funding Fee.
The amount of the funding fee can vary based upon the type and term of the loan as well as how many times the borrower has taken out a VA loan. In most cases however, for a first time buyer and a 30 year fixed rate loan, the funding fee is 2.15 percent of the loan amount. For a $200,000 loan, the funding fee would then be $4,300 yet does not have to be paid for out of pocket. Instead, this fee is rolled into the final loan amount. In this example, the loan amount would be $204,300 and is the figure upon which the monthly payment is calculated.
All VA loans, whether for a purchase or a refinance, will have a funding fee rolled into the loan. There are instances, however when the funding fee is waived entirely. VA guidelines state that whenever an eligible borrower receiving compensation as a result of a service-related disability, the funding fee can be waived. Surviving spouses of veterans or veterans who are designated as eligible to receive disability pay as a result of a physical exam prior to being discharged can also have the funding fee waived.
When lenders verify VA home loan eligibility, they request a Certificate of Entitlement directly from the VA. On this certificate, if there is a funding fee exemption, it will be clearly stated on the certificate. A funding fee can also be refunded to the applicant. When a borrower takes out a VA loan and there is a funding fee and later a disability award is issued, the fee can be given back to the veteran retroactive to when they first applied for the funding fee waiver.