Are you thinking about applying for a VA loan? If so, you should have no problems getting approved if you meet the guidelines for this loan type. One vital thing to know is that you will have to pay a funding fee if you take a VA loan. If you are new to the world of mortgages, you might be wondering what this fee is for and how much it will be. These are terrific questions, and here are the answers to these questions.
The Purpose of the VA Funding Fee
The Department of Veterans Affairs is an entity that helps people who are in are were in the military. They offer a variety of programs to help these individuals, and one of them is the VA loan program. They created this loan program to help military workers become homeowners by providing a specific loan type for them. The result of this is the VA loan program. The VA reduces the risk to lenders that issue VA loans by offering to pay off the loans if a borrower defaults on his or her loan. To do this, the VA charges a funding fee on every loan issued. The VA holds onto these funds and uses them to bail out borrowers that default.
The Cost of the Fee
The amount you must pay for the VA funding fee depends on several factors, including the following:
- How many VA loans you have had – The funding fee for a VA loan is lower for first-time users. If you get a VA loan for the first time, you can pay as little as 2.3% for the funding fee. If you get a second VA loan, you will pay a higher rate for the funding fee.
- The size of your down payment – The second factor that affects the rate you pay is the size of your down payment. You will have a lower rate if you put money down on the loan, rather than if you do not.
These are the primary factors that affect the rate of the funding fee you must pay.
Other Things to Know
Other loan types that may not require paying a funding fee; however, they may have different fees attached. One of the best things you can do when you are ready to get a loan is to contact a mortgage broker. A mortgage broker can help you determine if you qualify for a VA loan and the fees you would have to pay if you get one.
For more information about VA loans, speak with a professional.