On February 14, 2023, the U.S. Department of Veterans Affairs (VA) announced a scheduled change to VA Funding Fee Rates for loans closed on or after April 7, 2023.
VA Loan is a type of government loan that is insured or backed up by the US Federal government. This program is available exclusively to eligible veterans, active duty service members and surviving spouses. As compared with other loan products, VA loan offers better interest rates, low or zero down payment and no monthly mortgage insurance premium (MIP).
However, VA loans require that a funding fee be charged on non-exempt Veterans or those borrowers who do not meet the qualifications for a fee waiver. This fee is a one-time fee paid to the VA.
Currently, Veterans who put up downpayment less than 5% of the purchase price pay a funding fee of 2.3% for first time use and 3.6% for subsequent loans. Please refer to the table below.
With the issuance of Circular 26-23-06, for loans closed on or after April 7, 2023, the VA Funding Fee is being reduced by 15 to 30 basis points (bps). For Veterans who put up downpayment less than 5% of the purchase price, the new funding fee is 2.15% for first time use and 3.3% for subsequent loans. Please refer to the table below.
These changes apply to all VA Purchase, construction loan and VA Cash-out refinance only.
Please talk to your Loan Officer if you have any concern regarding this new amendment.
