The VA recently announced a scheduled decrease to VA funding fee rates for loans closed on or after April 7, 2023. The VA funding fee helps to reduce the government’s cost associated with administering the VA Home Loan benefit. The one-time funding fee doesn’t go to the lender; instead, it goes directly to the Department of Veterans Affairs.
With the reduction, a first-use VA purchase or construction loan closing before April 7, 2023, with a down payment of less than 5%, would charge a funding fee of 2.3%. But with the new rates in effect, the funding fee decreases slightly to 2.15%. So, for example, the funding fee for a $100,000 VA Home Loan closing before April 7, 2023, would be $2,300. But if you close on April 7 or later, the funding fee is reduced to $2,150.
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Although the decrease isn’t huge, it will save homebuyers some money, and naturally, the larger the loan amount, the more they’ll save. As a buyer, you’ll need to decide whether the reduced amount is worth adjusting closing dates. You should also note that April 7 this year is Good Friday, and some companies close on the Monday after Easter, which falls on April 9.
Your lender can help you decide how this deduction affects you and how to use this change to your best advantage.
Note that the funding fee amounts for an interest rate reduction refinance loan (IRRRL), a manufactured home loan (homes not permanently affixed to the property), a loan assumption, and a Native American direct loan (NADL) remain the same.
Finally, if you have a disability from the VA, you’re already exempt from the funding fee, so this change doesn’t affect you.