Calculating VA Funding Fee on Purchase Transactions
Newrez LLC "Newrez" Approved Correspondent Clients: please note the following clarification for calculating the VA Funding Fee when the Veteran pays a cash down payment in a Purchase transaction. The Funding Fee rate, as indicated in the Chart below, depends on the amount of cash down payment and whether the Veteran is using their VA Home Loan benefit for the first time or for a subsequent use.
The down payment is calculated as the difference between the sales price of subject property and Base Loan Amount (loan amount before VA Funding Fee calculation), regardless, if the Base Loan Amount is capped by a VA Notice of Value (NOV) for subject property that is less than the sales price. Also, when the sales price exceeds the NOV, the difference must be paid by the veteran without using borrowed funds.
In a purchase transaction, for example, where the sales price is $100,000 and the maximum Base Loan Amount is limited to $95,000 due to the NOV of the same amount, the $5,000 or 5% cash down payment, from non-borrowed funds, paid by the Veteran would reduce the VA Funding Fee rate to 1.65% or $1,567.50.
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VA Funding Fee Rates for Purchase Transactions (For Loans closing through December 2021) |
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First-time use of VA Home Loan Entitlement |
If cash down payment is … |
Funding Fee |
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Less than 5% |
2.3% |
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5% or more |
1.65% |
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10% or more |
1.40% |
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Subsequent use of VA Home Loan Entitlement |
Less than 5% |
3.60% |
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5% or more |
1.65% |
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10% or more |
1.40% |
Clients and associates are reminded that the above down payment calculations for the VA Funding Fee do not apply to the calculations for determining Ginnie Mae and Newrez requirements for meeting sufficient VA Loan Guaranty and/or equity amounts that are based on 25% of the lesser of Appraised Value or Sales Price.
Please refer to the Newrez Product Profiles and Underwriting Guide for additional details.
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