VA Thought of the Week: Does the VA Funding Fee cost the Veteran too much?

Blog posted On May 20, 2019

Many people think the VA Funding Fee is more expensive than FHA or Conventional loans, making those a better deal. 

The reality is that on a loan of $484,350, the funding fee is $10,413.  On an FHA loan of the same amount, the upfront mortgage insurance (UFMI) is $8,179.  However, the FHA loan requires not only a nearly $17,000 down payment but also has a monthly mortgage insurance payment of nearly $340 per month on top of the UFMI.

The VA Funding Fee amortized over 30 years is just $55.90 per month compared to the amortized UFMI and Monthly MI that will cost the borrower $380 per month.  The same buyer using average credit scores will pay nearly $415 per month for normal Mortgage Insurance with a 5% down FNMA loan.

When you consider the additional expense of Mortgage Insurance for an FHA or Conventional loan, the $400 difference would also allow the Veteran to qualify for a much larger loan.

So why would anyone put a Veteran into any other loan but a VA Loan?

Serve those that serve us!  Support Veterans.

*FHA scenario is based on a 4.070 interest rate. A higher interest rate would result in a higher payment.

VA Payment example: If you choose a $200,000, 30 year loan at a fixed rate of 4.726%

(4.90% APR), with a loan-to-value (LTV) of 100%, you would make 360 monthly payments of $1,061.00. Payment stated does not include taxes, insurance, and the VA funding fee, which will result in a higher payment

FHA Payment example: If you choose a $200,000, 30 year loan at a fixed rate of 4.726%

(4.90% APR), with a loan-to-value (LTV) of 96.5%, and a $157/month PMI payment, you would make 360 monthly payments of $1,182.00. Payment stated does not include taxes and insurance, which will result in a higher payment.