Summary: VA funding fees in California can range from 1.25% to 3.3% of the loan amount. These required fees can be paid in cash or “rolled” into the loan. Some borrowers, including disabled vets, do not have to pay them.
This article is part of an ongoing series that explains important aspects of the VA home loan program in California. (You can visit the main topic page for more articles on this subject.) Today, we’ll talk about VA funding fees for California home buyers who use this program to buy a house.
VA Funding Fees in California
Let’s start with some basic terminology:
- A VA loan is a mortgage loan that is guaranteed by the federal government, via the Department of Veterans Affairs. This program offers borrowers some unique advantages, such as the ability to buy a house with no down payment and no mortgage insurance. The VA loan program is open to most military members and veterans, and their spouses in some cases.
- A funding fee is a one-time payment that borrowers pay directly to the VA, when using this particular mortgage program. These fees are partly what make the program possible. Without them, there probably wouldn’t be a VA loan program. The proceeds go directly to the Department of Veterans Affairs and help to cover losses relating to mortgage defaults.
This brings us to the next logical question. How much are VA funding fees in California and nationwide?
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How Much Do They Cost?
VA loan funding fees in California can vary based on several factors. The three most important factors that determine the amount you pay are:
- The type of military service (active duty, reserves, or National Guard)
- Whether or not you have used a VA loan in the past
- Whether or not you’re making a down payment (and the size of the down payment)
Many borrowers who use this program to buy a house in California choose to avoid the down payment altogether. After all, that’s one of the primary advantages of using this program. For those borrowers, the VA funding fee usually ranges from 2.15% to 3.3% of the loan amount.
Borrowers who make a down payment of some kind typically end up with a lower funding fee, as low as 1.25% in some cases. Additionally, first-time VA loan users tend to pay a lower fee, while repeat or “subsequent” users tend to pay a higher amount.
Veterans receiving compensation for a service-connected disability, or those who would be entitled to such compensation, typically do not have to pay this fee.
You Can Pay It up Front, or Finance It
As it states on the Department of Veterans Affairs website: “You have the option to finance the VA funding fee or pay it in cash, but [it] must be paid at closing time.”
This means you don’t necessarily have to pay it up front, or out of pocket. It can essentially be “rolled into” the loan amount and financed over the long term. So it’s not really an obstacle.
These are just the general guidelines and requirements for VA funding fees in California. If you’d like a more accurate quote and estimate, tailored to your particular situation, please let us know.