California Veterans using their VA Eligibility are about to get a nice surprise, as the Department of Veterans Affairs recently announced they would  lower the VA Funding Fee.  The drop will help save thousands for VA Loan borrowers in California. The typical charge for “First Time Use” currently is 2.15%. The new percentage for first Time Use will be 1.4% for loans closed on or after October 1, 2011. On a $400,000 loan, that equates to a savings of $2,800.

New VA Funding Chart | California VA Loans

Below is a chart comparing the current VA Funding Fee’s to the new Funding Fee percentages.


VA Funding Fee Example for Los Angeles Veteran

As an example, let’s say a retired military Veteran wants to purchase a home in Los Angeles for $650,000 with Zero Down payment. (The 2011 VA Loan Limits for Zero Down financing are $700,000.) If this is the Veterans first time using his VA eligibility to purchase a home, then his Funding Fee under the current rules would be $13,975. ($650,000 * 2.15% = $13,975). The VA Funding Fee can be financed into the loan, which is what happens on most loans. In this case, the new VA loan would be $663,975. But if the loan closes after September 30, 2011, then the new Funding Fee of 1.4% applies. The Funding Fee to be financed into the loan would be $9,100, for a total loan of $659,100. That results in a savings of $4,875.  A $9,100 charge is not bad for the ability to purchase a home with no down payment. Also remember, VA does not have a monthly Mortgage Insurance payment, like other types of “high loan to value” loan programs.

Funding Fee Waived for Disabled Veterans

Veterans who have a service related disability may have the Funding Fee waived, which can be a very big savings. The VA has to consider the Veteran to be at least 10% disabled, which is verified by the lender.

The first thing a California Veteran needs to do when considering using VA Eligibility is talk to a lender who specializes in the VA loan program. A California VA Loan Expert should be able to provide a detailed loan scenario which will break down the purchase price, loan amount, payment, and amount needed to close, if any. He should also be able to explain the difference between the CalVet loan program and the standard VA loan program. Once the Veteran knows what purchase price they can afford, it is important to get a VA loan PreApproval.