by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
N.B: On the day before I published this, HR 674 passed, reverting the funding fee amounts to the “old” levels. It was updated in VA Circular 26-11-19, published November 22, 2011. The “new” lower funding fee schedule was in effect for three days, from Nov 18-21. Sorry for the confusion.
Home buying became a bunch cheaper for eligible veterans. On November 18, 2011, the VA lowered the amount it charges veteran borrowers, for the VA loan guaranty. Rather than charge private mortgage insurance (PMI), like conventional loans do, or a combination of an upfront mortgage insurance premium (UFMIP) and a monthly insurance premium (MIP), like the FHA does, the VA relies on a one-time charge, which can be financed, called a funding fee.
The VA looks at a service member’s life cycle and tailors the funding fee to meet his/her expected abilities to finance a home. For example, a first-time home buyer pays a funding fee of 1.4% of the loan amount, for a zero-down loan. The VA expects that service member to have some equity for his/her second home purchase so, should the veteran choose to buy “no-money-down”, on a subsequent purchase, the VA funding fee is double, or 2.8% of the loan amount.
Veterans who put down 5% of the purchase price are only charged .75% of the loan amount. Veterans who put down 10% of the purchase price are only charged .5% of the purchase price. All refinance transactions, including the no-income qualification and no appraisal needed, refinance transaction, otherwise known as the VA Interest Rate Reduction Loan (IRRL), are charged .5% of the refinanced loan.
A full table, of the new VA funding fee amounts, can be found on Mortgage Rates Report.
Don Reedy says:
Brian,
This is great information, and not just for veterans.
I’m going to try to spread the word among Realtors here in San Diego. This is the specific kind of information that separates the men from the boys….or as I would say, the Marines from the (select any of the other stellar services). 🙂
Realtors. Take Brian’s post, re-post and link back to his mortgage business and web site. You’ll benefit, and on the eve of Thanksgiving, all our veterans, active and retired, will profit and prosper as well.
November 23, 2011 — 9:10 am
Johnny Brooks says:
It’s about time the veteran’s have a program in place that will assist them in purchasing a home. These folks have given so much to society.
November 24, 2011 — 12:09 am
Jim Wagoner says:
I’m pretty sure the new fees did not go into affect. Maybe someone could verify this.
November 27, 2011 — 6:38 pm
Wayne Long says:
Hey Brian do you have an update? Did these new fees take effect??
November 28, 2011 — 6:07 pm
Brian Brady says:
Jim’s right. On the day I published this, HR 674 passed, reverting the funding fee amounts to the “old” levels. It was updated in VA Circular 26-11-19
The “new” lower funding fee schedule was in effect for three days, from Nov 18-21. Sorry for the confusion
November 29, 2011 — 5:51 am