June 1st, 2019 11:49 AM by Joan Rusco
It’s time to set the record straight. We’ve been receiving calls concerning a report on a local tv station that implied the Veterans Administration may be withholding some refunds due to those who’ve taken out a VA mortgage loan. We’re going to drive a truck through some of the holes left in that report.
First, some background on a VA loan. As we’ve written on these pages there is never a monthly mortgage insurance payment on a VA loan, even when you borrow 100% of your home’s value. A VA loan is only mortgage product with that feature. If you borrow more than 80% of your home’s value using a conventional or FHA loan you’re going to pay a monthly mortgage insurance premium (sometimes referred to as P.M.I.). But, as the old cliche goes, there is no free lunch.
Instead of a monthly insurance premium the V.A. charges a one-time, upfront funding fee. This can be rolled into the loan so there’s no out of pocket expense as you acquire the loan. The amount of the funding fee depends on whether or not you borrow 100% of the home value or you’re putting some money down. It also depends whether or not you’ve used your VA mortgage benefit before. If it’s your first time and you’re borrowing 100% of the home’s value you’ll pay 2.15% of the loan amount for regular military. It’s slightly higher for those in the Reserves or National Guard. If you’ve used your benefit before the funding fee increases to 3.3%. These fees are reduced if you’re putting some money down. Call Brad at 612-240-9922 for further details on the fee amounts. As indicated above, and by details we’ve just disclosed, you can see there is no free lunch. But we think this fee is better than a monthly mortgage insurance premium which can add considerably to your monthly payment.
There’s a major factor in this funding fee that cannot be overlooked. If you have any degree of disability declared as a result of your military service you are completely exempt from the funding fee. This is where we return to that tv report mentioned above.
Fair minded viewers were left with the impression the VA was withholding refunds due to disabled veterans who qualified for the funding fee exemption yet had paid that fee. Close examination of the report showed they did not name a single reliable source in that report. They implied disabled veterans are not getting the refunds they deserve. We suspect any missing refund is simply the result of lack of personal to process the payments. In this spirit we want to be perfectly clear about the process at VALoansMN; when you apply for a loan we’re going to ask you whether or not you have any degree of military related disability. If the answer is yes, we’re going to include that in your application which will exempt you from paying the funding fee. The veterans we serve are not going to be in a position of having to wait for any refund because our veterans will not be charged that fee in the first place.