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

Posted On May 20, 2019

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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.