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Fees and Limits for a VA Hybrid Loan

Funding Fee

Every VA hybrid loan has a funding fee attached to it. Funding fees vary widely, from 0.5% to 3.3% of the total loan amount. This chart shows the funding fees for various categories to give you some idea of what you might pay for your VA hybrid loan.

Funding Fees for VA Loans

Type of Veteran Down Payment Percentage for First-time Use Percentage for Subsequent Use
Regular Military None
5% or more
10% or more
2.15%
1.5%
1.25%
3.3%
1.5%
1.25%
Reserves/National Guard None
5% or more
10% or more
2.4%
1.75%
1.5%
3.3%
1.75%
1.5%

The factors that influence funding fee percentages are whether or not the buyer is on active duty, the buyer’s length and time of service, and the type of veteran the buyer is. The funding fee also increases if the buyer has used the VA loan benefit before. A down payment generally decreases the amount of the funding fee. Veterans with a service-connected disability (a 10% or greater disability rating), as determined by the VA, are exempt from the funding fee.

VA funding fees are small compared to all the savings you get with a VA hybrid loan.

VA funding fees are small compared to all the savings you get with a VA hybrid loan. The fee helps sustain the VA lending program, which is not funded by taxpayer dollars or the funds from other benefits programs that the VA offers. The funding fee is set and collected by the Department of Veterans Affairs.

Closing Fees

Closing costs can vary quite a lot, but 3% to 5% is considered fairly standard in most areas of the country. You can get a more specific number after you have started looking at properties.

Closing costs are not technically covered by a VA hybrid loan. But you can achieve the same effect by carefully structuring your loan’s contract. The loan price will be the purchase price of the house plus the obligatory VA funding fee. If you need or want to have the closing costs covered by the loan, you will have to increase the price and have the seller pay the closing costs and expenses equal to the amount of the increased price. As long as the home appraises for the price you pay, you will have your closing costs included as part of your loan.

Each local VA office sets the closing costs the veteran is allowed to pay, based on what is both reasonable and customary in that geographic area. The veteran is not allowed to pay any other costs associated with the loan other than the ones on the VA’s list.

There are some necessary fees that the veteran is not allowed to pay for, like escrow, processing, and underwriting (among others). One option is for the seller to pay such fees. In some cases, a real estate agent that represents the buyer can contribute to the closing fees in the form of a credit. Lenders can also offer a credit to the buyer by adjusting the borrower’s interest rate. The lender can also charge the borrower a one–percent origination fee (which is an allowable charge).

Limits on Loans

The VA does not set any kind of a cap on the amount of money you can borrow with a VA loan. However, the VA does set a limit on how much of the loan they can be held liable for. This will usually affect the amount of money that you can borrow. These loan limits vary depending on your geographic location. Limits are subject to change each year.

The VA pledges to guarantee around a quarter of the loan amount. The first layer of entitlement is $36,000, and the second layer is $68,250. This equals $104,250, and most lenders will generally loan four times the amount guaranteed by the VA, which is $417,000 in most parts of the country. The VA has higher limits in other parts of the country. Down payments aren’t required unless you seek a loan higher than these limits.

It is very important to note that there is no monetary limit on loans, but lenders won’t generally go above the VA county loan limit because it would expose them to more risk.

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