Funding Fee & Costs
Zero down does not mean zero cost. Here is the part most advertising leaves out.
The VA funding fee
Most VA borrowers pay a one-time fee to the VA that helps keep the program running for the next generation. It is not mortgage insurance and it is not paid monthly.
The amount depends on your service category, your down payment, and whether you have used the benefit before. It can usually be financed into the loan, which increases your balance and the total interest you pay.
Many veterans are exempt. Veterans receiving VA compensation for a service-connected disability, those who would receive it but for retirement or active duty pay, certain Purple Heart recipients, and certain surviving spouses generally pay no funding fee at all.
Current amounts are published free of charge by the VA at va.gov.
What you may still pay at closing
A down payment is one cost. These are the others, and several can be covered by a seller credit or a lender credit depending on the transaction.
- Closing costs such as appraisal, title, recording, and origination charges
- Prepaid items including property taxes and homeowners insurance
- Escrow account deposits
- The one-time VA funding fee, unless you are exempt
- Earnest money, which is credited back to you at closing