Can VA Funding Fee Be Rolled Into Loan?: VA Funding Explanation

The VA loan is a mortgage loan option for eligible veterans, active duty service, and surviving spouses. However, there is also a VA funding fee whenever you want to apply for a VA loan. So, what is a VA funding fee? Can VA funding fee be rolled into loan? Keep reading, and we’ll find the answer.

What is the VA Funding Fee Mean?

Before we get the answer to “Can VA funding fee be rolled into loan?” you might need to understand more about the VA funding fee. In short, the VA (Department of Veterans Affairs) funding fee is a one-time payment for the requirement for a VA home loan or VA refinance.

Unlike a conventional mortgage loan, a VA loan has more lenient requirements. For instance, they don’t require mortgage insurance. However, they ask you to pay a VA funding fee.

This funding has the function of securing lenders if you can’t pay the loan. The Department of Veterans Affairs is the one that guarantees the VA loan. This department will repay the lender some portion of the loan if the borrower can’t pay. In other words, the VA funding fee helps to cover the cost that the VA guarantees.

At this point, the VA funding fee is also referred to as a VA loan mortgage insurance or VA loan Private Mortgage Insurance (PMI). The VA funding loan has a similarity with PMI. However, you can pay this funding fee for one time.

Each type of loan has its version of mortgage insurance. Here are examples of mortgage insurance methods for some types of home loans:

• Conventional loans: you’d need to pay PMI if you don’t pay a down payment of 20%. However, you can request to remove it once you pay off the 20% of the loan.
• FHA loans: you’d need to pay a monthly Mortgage Insurance Premium (MIP) for at least a period.
• VA loans: you will need to pay a one-time mortgage funding fee. You can pay this as the closing cost or build it into the loan.

How is the Fee Paid?

To get the answer to the question, “Can VA funding fee be rolled into loan?” you need to understand how you pay this cost. There are two ways you can choose to pay a funding fee. The methods include paying it with the closing costs and rolling it into the loan.

The closing costs refer to a payment to the lenders for their assistance in creating your loan. You will encounter this fee during the closing process, including the title search and home appraisal process.

For the VA loan process, you can pay the funding fee as the closing costs. However, the funding fee would be expensive since you’ll spend all the fees in one lump sum.

On the other hand, you can pay the funding fee by rolling it into the loan. Rolling your funding fee into your mortgage loan will make your monthly payments slightly higher. However, this method seems fair enough since you don’t have to pay all the fees simultaneously.

For example, you plan to apply for a mortgage loan for 30 years. You purchase a mortgage loan of $300,000 with an interest rate of 5.7% and no down payment. Your monthly payment would be $1,741.

Then, the funding fee for the first-timer would be $6,450 or 2.15% of the $300,000. By rolling it into your loan, your monthly payment would be approximately $1,779.

How Much Do You Pay the Fee?

After knowing the answer to “Can VA funding be rolled into loan?”, you will need to consider how much you pay the cost. Some factors can influence your funding fee. The factors include:

• Types of loans you get,
• The amount of your loan,
• Your first time or subsequent time using the loan and
• Amount of your down payment.

1. VA Funding Fee Chart for VA Direct Home Loan

On April 7, 2023, there is the latest chart of funding fee rates. The chart below shows the funding fee rates that you can use for purchasing a VA-backed and direct home loan:

As you can see, the bigger down payment makes a smaller funding fee. Although it is not a big change, it still makes a difference.

2. VA Funding Fee Chart for Other Types of VA Loans

If you purchase other types of loans, there is also a chart of rates for its funding fees. The chart rates of the funding fees are below:

For your note, these types of loans don’t change your funding fee based on the amount of your down payment.

Do You Have to Pay the Funding Fee?

This question correlates to the “Can VA funding fee be rolled into loan?” question. You may wonder if there is any exemption from paying the funding fee. If you want to purchase the VA loans, you must pay the funding fee. However, you can claim a VA funding fee exemption or a VA refund if you meet several requirements.

1. The VA Funding Fee Exemption

You won’t need to pay a funding fee if you meet one of these conditions:

• Receiving a VA compensation for service-connected disability;
• Earning a retirement or active-duty pay instead of service-connected disability compensation;
• An active-duty member who receives the Purple Heart during or before the loan closing date;
• Receiving a reimbursement as a result of pre-discharge; and
• Receiving Dependency and Indemnity Compensation (DIC) as a surviving spouse of a veteran.

You can check your eligibility for VA disability benefits by checking it on the VA website. After you make a claim, the VA will decide whether you are eligible for the VA exemption or not.

2. The VA funding Fee Refund

If you receive VA compensation for service-connected disability, you may request a VA refund. However, you must earn the compensation before the loan closing date. If you get the reimbursement after the loan closing date, you still need to pay the funding fee. 

If you are eligible for a VA refund, contact the VA regional loan center at 877-827-3702. The staff will help you from Monday through Friday, 8:00 a.m. to 6:00 p.m. Eastern Time.

Have You Found the Answer to “Can VA Funding Fee Be Rolled into Loan?”

Now, do you find the answer to “Can VA funding fee be rolled into loan?”. Overall, you can merge your funding fee into your loan as a monthly payment. A VA funding fee is a small price for greater benefits of VA home loans. 

Compared to other types of home loans, VA loan offers the lowest mortgage rate possible. Moreover, the VA loan program offers more benefits for service members, veterans, and their families.