VA Disability Benefits and Funding Fees: The Basics You Need to Know

GO FULLY

First off, let’s start with the fact that if you’re trying to qualify for a home purchase and you’re a vet, here are some of the most important factors you need to know… 100% financing. VA loan limits are now unlimited, however if you want to buy a home with “no money down” your limitations are like Jumbo Loans which are $417,000.00. That’s not a bad number considering you don’t put anything in a house.

You, the homebuyer, would receive an “entitlement” of $36,000.00 on loans of $144,000 or less. If a house is larger than that, you’re in what’s called “bonus entitlement,” which basically takes the conforming loan limits of $417,000.00 and multiplies it by 25%, which is the amount guaranteed by the VA. Your rebate entitlement begins for loans above the $144,000.00 mark. Entitlement can be very confusing, so suffice it to say that you can use your entitlement repeatedly…you just need to know what your entitlement entitles you to. Confused?

It is not too bad. Let’s say you currently own a home and want to buy a larger home, which is allowed under VA guidelines. You need to know what right you have left. In other words, how much home can you buy using 100% financing if that’s the way you want to go?

Let’s say your right is attached to another property. You sold it, but when your COE (Certificate of Eligibility) runs and it still shows your entitlement is still being used, you or your lender must clear that up first. The COE rights division is handled by the VA in Winston-Salem, NC. Good proof to have is the HUD closing statement you received when you sold your home. If you lost it or can’t find it for any reason, call the title company or attorney’s office where you closed and ask them to print a copy for you. When you arrive at the COE center in Winston-Salem, tell them that you have proof of the sale of your home and would like to fax it to them. It usually takes a few days to clear that property, but once it is cleared, they will provide you and your lender with a new COE that will show you your total entitlement of $36,000.

FINANCING RATES

This is not as confusing as the right. The law requires a “financing fee” that lenders put on your loan. For first time VA loan users, it is 2.15% of the loan amount. So if you buy a home priced at $225,000.00, the finance fee for this loan would be $4,837.50. (225,000 x 2.15%) The finance fee would be “wrapped” into the loan, bringing your financed amount to $229,837.50. (225,000 + 4,837.50 = 229,837.50) What is a financing fee you ask for? It is a fee calculated on “no down payment” loans and contributes toward down payment costs, helping to reduce costs that taxpayers normally pay. Your financing fee increases to 3.3% if you use it again. This is called the reuse fee. The reuse fee is based on the fact that you have already used your benefits once before and normally should have had the opportunity to build up some equity or equity from the previous home in which you resided.

DISABILITY FEES AND FINANCING

Guess what? Take all the fees I just talked about from the illustration above and throw them away! There are several extenuating circumstances that do not allow a veterinarian to pay a funding fee “if” they meet the following conditions;

or Had a service-connected disability of 10% or more
oVeterans receiving service-connected disabilities if not
receive retirement pay
o Surviving spouses of veterans who died in the service of our country or from a service-connected disability, even if the surviving spouses are veterans and do not use their own entitlement to the loan.

One interesting thing about the funding fee is that no matter how long you use your VA benefits, you will never pay a funding fee with the aforementioned disability. Another point about VA loans is that you never, ever have mortgage insurance on a VA loan. There are two things to keep in mind with VA loans. If you ever see your lender put a financing fee on your loan and the VA has declared you 10% or more disabled, ask them to remove it. They will ask for proof of your disability that will be included in your loan documentation that you provided to the lender. The second is that if you ever see mortgage insurance on a VA loan, it should be removed as well. In either case, be sure to get a good faith estimate from them.

I hope this gives you at least the basic information you need to know… some confusing and some not so bad. A good lender will be able to point out these and other points in your initial consultation with them.