VA Funding fees going down October 1 & why a down payment on a VA loan makes sense

VA funding fees will be going down for purchase transactions closed on or after October 1, 2011. First time users, either Veteran or Reservist/National Guard, will see the funding fee reduced by 0.75% across the board. Second and subsequent users will see the funding fee reduced by 0.50 or 0.75%. Funding fees will stay the same for VA “streamline” interest rate reduction mortgages. The funding fee for service members who have a service related disability remains at zero. This would mean that on a $200,000 VA mortgage, with zero down, the funding fee has been reduced by $1,500!

I love to play with the numbers to see what will provide the greatest benefit to a borrower. While most VA borrowers want to put as little money as possible into the deal, some VA borrowers have ample cash reserves and little or no credit card debt. A competent mortgage professional should always examine the overall financial picture of a client, and offer options to the client if their is a net tangible benefit. For example, if a first time VA borrower put $10,000 down (5%) instead of zero on a $200,000 mortgage, the funding fee would decrease from $2,800 to $1,500 for a savings of $1,300. A safe return of 13% is pretty hard to find these days.

As always do the numbers to see what is best for your unique financial situation. One size fits all applies to baseball caps, not to mortgages.

Veteran

Reservist/ National Guard

Old

New

Old

New

First Time User
 
  Down payment:
     Less than 5 percent*

2.15%

1.40%

2.40%

1.65%

     at least 5 percent but less than 10 percent

1.50%

0.75%

1.75%

1.00%

     10 percent or more

1.25%

0.50%

1.50%

0.75%

Second and Subsequent Use
  Down payment:
    Less than 5 percent*

3.30%

2.80%

3.30%

2.80%

    at least 5percent but more than ten percent

1.50%

0.75%

1.75%

1.00%

    10 percent or more

1.25%

0.50%

1.50%

0.75%

* Includes “Cash-out” refinancing loans

Chip Allen

Crestline Mortgage Bankers

A Division of Universal Lending Corp                                     

Direct: 303.947.2109 

Fax: 303.987.0676

Loanchip@hotmail.com

Colorado Mortgage Broker License # 100019831

NMLS# 378621

Your Lender for Life!

When people you care about need a mortgage,

for purchase or refinance, please do not keep me a secret.

Click here to Get started searching for YOUR Colorado Dream Home.

Featured Listings