What are the VA, FHA, and USDA or RD up-front funding / guarantee fees for?

Thursday, 16 February 2012 22:06

The VA funding fee is required by law. The fee, currently 2.15% on no down payment loans for a first-time use, is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is 3.3%. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment.  The amount for the funding fee varies for reservists, VA streamline refinancing, and higher down payment loans.  If an eligible veteran receives 10% or more VA disability income, the funding fees are waived!  The FHA funding fee is currently 1% no matter how much is put down over the minimum 3.5% down payment and the USDA funding fee is 2% on purchases and 1.5% now on USDA streamline refinancing.  All of the up-front funding or guarantee fees for government loans basically support the operation of each program and most of the time can financed on top of the base loan amount.  From time to time these amounts will change based on the needs of the individual programs.  For more specific questions on this topic, please contact me.