VA Underwriting Guidelines 

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VA Funding Fee

The veteran must pay a VA funding fee to help defray costs of the VA home loan program. There are two exceptions. A veteran could be exempt because of disability and widows of veterans may be exempt.

The funding fee is never refunded.  It is not insurance.  The funds are used to help offset to cost of defaulted loans.

The percentage appropriate to the veteranís particular circumstances are listed in the table below. Apply this percentage to the loan amount to arrive at the funding fee the funding fee may always be financed in the loan. 

Purchase and Construction Loans

Type of Veteran

Down Payment

Percentage for First Time Use

Percentage for Subsequent Use

Regular Military

None

5% or more (up to 10%)

10% or more

2.15%*

1.50%

1.25%

3.30% *

1.50%

1.25%

Reserves/National Guard

None

5% or more (up to 10%)

10% or more

2.40%

1.75%

1.50%

3.30%*

1.75%

1.50%

 * The higher subsequent use fee does not apply if the veteran's only prior use of entitlement was for a manufactured home loan.

Cash Out Refinance Loans 

Type of Veteran

Percentage for First Time Use

Percentage for Subsequent Use

Regular Military

2.15%*

3.30%*

Reserves/National Guard

2.40%

3.30%*

* The higher subsequent use fee does not apply if the veteran's only prior use of entitlement was for a manufactured home loan.

Other Types of Loans:

Type of Loan

Percentage for

First Time & Subsequent Use

Interest Rate Reduction Refinancing Loans 1

0.50%

Manufactured Home Loans

1.00%

Loan Assumptions

0.50%

 

Funding Fee Exemption 

The following persons are except from paying the funding fee: 

  • Veterans receiving VA compensation for service-connected disabilities. 
  • Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay. 
  • Surviving spouses of veterans who died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan). 

The lender must verify exempt status by obtaining one of the following: 

  • A properly completed and signed AV Form 26-8937, Verification of VA Benefit-Related Indebtedness, indicating the borrower's exempt status. 
  • An award letter issued within 1 year of the date of the loan application indicating the veteran is entitled to receipt of VA disability compensation. 
  • For a veteran who elected service retirement pay instead of VA compensation, a copy of the original VA notification of disability rating and documentation of the veteran's service retirement income, or 
  • Indications on the Certificate of Eligibility that the borrower is entitled as an unmarried surviving spouse. 

Consult VA if the borrower's status is unclear after reviewing the appropriate documents, or if conflicting information is found. Submit a copy of the documentation used to verify exempt status with the closing package whenever no funding fee is remitted. 

Exception: The lender does not have to submit the documentation if the borrower is an eligible surviving spouse, or the documentation had been previously provided to VA with the loan application as verification of the veteran's income. 

If the veteran's exempt status cannot be verified prior to loan closing, the funding fee must be remitted as if the borrower was not exempt. Indicate in the closing package that the veteran claims exempt status. VA will determine the borrower's status and refund the funding fee if appropriate. 

 

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