Bald Eagle with American FlagI’ve gotten three VA loans since getting honorably discharged from the Army: one to buy a home and two to refinance. I got one other mortgage that was a conventional 30-year fixed because my mortgage broker at the time told me it was a better deal for me than a VA loan. I think he was just being lazy and didn’t want to take the time to find out if a VA loan did make more financial sense for me. It probably would have. It did the other three times.

Anyway, that’s all water under the bridge now. I’m telling you this because I want to make it clear that I’m very familiar with the VA loan, not just as a team member at Quicken Loans, but as a veteran that has used the benefit several times. And I learned a few things along the way. Here are some of them.

What Role Does the Department of Veterans Affairs (VA) Play in VA Loans?

Let’s start at the top. When did the VA loan begin and why? To answer that question, check out this video. This is from a Google+ Hangout about the VA loan that I hosted last year. One of the guests was John Bell, of the VA, a foremost expert on the VA loan. Here he explains the history and most basic aspects of the VA loan.

One main thing I learned once I got my first VA loan was that the VA doesn’t actually fund VA loans; they only insure them for lenders who sell VA loans, just like any other mortgage. I was also under the impression that the VA would check the loans and make sure there was no funny stuff going on from the lender, that the mortgage rate was what it should be and that there were no unnecessary fees being charged on the loan. In other words, I thought the VA would safeguard me from getting ripped off by a disreputable lender.

Unfortunately, that’s not the case. The VA does do some random quality control on loans once they close, but it’s definitely up to the borrower to make sure they’re working with an honest and fair mortgage company. Just like any other loan, veterans should compare mortgage rates and fees, read reviews of the mortgage company and work with lenders that are recommended by family and friends.

The VA Does Not Set Mortgage Rates on VA Loans

Mortgage rates on VA loans are set by financial markets and lenders, not by the VA. Again, as I mentioned above, although the VA insures the loan and makes it easy for veterans to qualify for a mortgage, it doesn’t have anything to do with mortgage rates and won’t be able to help a veteran who unknowingly agrees to a rate much higher than current market rates. I got my first VA loan assuming that the VA was protecting me, and thankfully I didn’t get ripped off. So my advice is to make sure you’re getting the best rate possible. Compare Good Faith Estimates (GFEs) from several lenders and check for discount points charged for the offered rate. Need a brush-up on understanding a GFE? Check out this video.

The VA Charges a Funding Fee

The VA loan is a great benefit. I believe that wholeheartedly. That said, veterans should understand that they’ll have to pay what the VA calls a “funding fee,” and it can be costly. Funding fees are usually around 2% of the value of the loan, but they can range anywhere from 0–3.3%. So, on a $200,000 mortgage, the funding fee would average around $4,000. That’s a big chunk of change. In almost all cases, the funding fee can be rolled into the loan, but the option to pay it in cash is available should a borrower want to do that.

Here’s what I learned when I got my first VA loan: Any veteran with a service-related disability recognized by the VA is exempt from paying the funding fee. I injured my hand during my time in service and I have a 10% VA-certified disability. Because of that, I’ve been able to waive my funding fee on each of my VA loans. I figure that the waiver has saved me well over $6,000, which puts a smile on my face. Finally, one last bit of good news regarding the funding fee is that it may be tax deductible. Check with your tax advisor to see if you qualify.

Know As Much As You Can About the VA Loan Before You Start the Mortgage Process

The more you know, the better off you’ll be when you’re ready to refinance your home or buy a house with a VA loan. I hope the information I shared today was helpful. If you’d like to learn more about VA loans, you can check out these resources:

If you still have questions, leave them below. We will answer them. From one veteran to another, you have my word on that.

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This Post Has 17 Comments

  1. What will the closing cost be on a VA loan of $125,000 in Missouri? Im getting many different estimates. Also if you put the funding fee into the loan can you later pay it up?

    1. Hi Virgek:

      I can’t tell you what the closing cost would be because it depends on the way the loan is structured and that’s different for everyone. One of our Home Loan Experts could go over your situation and tell you better. As far as the funding fee, once it’s rolled into the loan, you can’t really break it out separately to pay it off, but you would be able to accomplish the same effect with extra payments toward the principal down the line to pay off the loan faster if you had the ability. For the closing costs question, I’m going to recommend you give us a call at (888) 980-6716 and we can go over everything with you. Thank you for your service!

      Thanks,
      Kevin

  2. I had a pest inspection done and the inspector stated that he would not write a letter unless i agree to guarantee service at cost between 500-700 up front. he would then give me the letter then they would schedule service another day. he says i am fee and clear of termites but because of a piece of wood next to cement that was left from the builder, it may have termites in it. this wood has been there for over 17yrs. I feel as though i was being forced to purchase his services vs paying for an inspection. Is this ethical?

    1. Hi McDaniels:

      This certainly doesn’t smell right. You’re either free and clear of termites or you aren’t. There’s not really a gray area. If I were you, I might consider finding a different inspector.

      Thanks,
      Kevin Graham

  3. I currently have a VA loan as a primary lender and SBA as a second lender lienholder. I want to know if I refinance the primary VA loan , will the VA count the second-lien holders amount of the loan against my new VA refiance loan.
    In other words if I refinance my $400,000 home and the SBA is $42,000 second lien . Will I be allowed to refinance the 100% of the value of my house in my VA primary loan without having the $42,000 secondary amount deducted but simply let it remain in place

    1. One of our Home Loan Experts can give you better information than I can in this particular situation. You can give them a call at (888) 980-6716.

      Thanks,
      Kevin Graham

  4. I am currently closing a VA loan for $350,000 the lender is charging 3 points for his fee, I was under impression that the standard is 2 points for veterans, this loan is with Veterans United. Also do we have to pay PMI as a veterans.

    Bill

    1. Hi William:

      There’s no standard fee. These things tend to vary from lender to lender. Also, there are potentially points for an origination fee, but you can also get prepaid interest points as part of getting a certain rate. I would make sure you’re very clear on what you were paying points for. Veterans don’t pay for mortgage insurance. Instead, there’s an upfront mortgage insurance fee that’s based on a percentage of the loan amount. The exact amount of the fee depends on how many times you’ve used your VA loan benefit to purchase or refinance. If you would like to go over your options with us, one of our Home Loan Experts would be happy to talk to you if you call (888) 980-6716.

      Thanks,
      Kevin Graham

  5. I am currently in the Military and I’m looking at being medically discharged from the service after 17 years service. The military is rating me at 40% and the VA is currently proposing a 80% rating. This leaves a lot of questions for me in regards to starting to look for a home utilizing my VA Loan. I will be a first time home buyer and I have seen what is required to get pre-qualified/approved for a VA Loan. But as I stated I’m still currently active and pending medical retirement in the next several months. Some of the questions I have are … Should I wait till I’m separated, due to not knowing exactly what my income will be afterwards? If I apply now while I’m still active then will I be able to waive my funding fee? etc… Any help/guidance would be helpful and deeply appreciated

    1. Hi Larry:

      It might make sense to know exactly what your income is in order to make sure we aren’t setting you up with more house than you can afford. I can tell you that as long as you have some level of VA disability, you’ll be able to wave your funding fee. I’m going to suggest that whenever you’re ready you talk to one of our licensed Home Loan Experts. They’ll be able to walk you through this. You can get in touch with them by filling out this form or calling (888) 980-6716. Thank you very much for your service!

      Thanks,
      Kevin Graham

  6. I would like to obtain information on utilizing a VA loan that exceeds the cap as I live in a very high-priced area (Westchester County, NY). I would also be purchasing with my domestic partner who I am not married to and want to know if there any restrictions.

    Thank you!

    1. Hi Dawn:

      VA loans follow conventional loan limits, so the loan limit in Westchester County is $636,150. You should also be able to get a loan with your partner. I’m going to recommend you start by speaking with one of our Home Loan Experts. You can do that by filling out this form or calling (888) 980-6716.

      Thanks,
      Kevin Graham

  7. Child support back payments are holding me up from getting a VA loan. Why can’t the back support be rolled into the mortgage? I am 100% percent disabled from Viet Nam, from Agent Orange. And due to many operations and recovery times was out of work, Had two feet of small intestines removed, open heart surgery, plate put in my left ankle etc.. I take 16 pills a day, missed a lot of work, why do I feel like I am being punished? I bought 16 acres of land on a CD, and am building my cabin as I can afford it. Is there any program out there that can help?

  8. My wife and I are both medically discharged from the military me after 9 yrs and her after 28. I have 60% va disability. We own a home in Wyoming that is currently being rented while awaiting to be sold and we are wanting to buy a house in florida is this do-able.

    1. Hi Alexander! I’ve passed your comment on to our team of client care specialists who will reach out soon and see what options you have.

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