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How Purple Heart Recipients Will Save on VA Loan Fees

Purple heart recipients will save thousands on VA Loan fees starting in January of next year. See how these changes will affect Purple Heart recipients in 2020.

The Purple Heart medal is awarded to service members who have been wounded or killed as a result of enemy action while serving in the U.S. military.

Purple Heart recipients will soon be able to save thousands of dollars on their VA Home Loan.

Let’s take a closer look.

Do Purple Heart Recipients Pay the VA Funding Fee?

With the passing of the Blue Water Navy Vietnam Veterans Act of 2019, active duty Purple Heart recipients will be exempt from paying the funding fee that the Department of Veteran Affairs charges on guaranteed home loans starting January 1, 2020.

In order to receive the exemption, you must provide proof of your Purple Heart to the lender and the VA before closing on your loan. Only the VA can determine the eligibility of a VA Funding Fee waiver.

Here’s a breakdown of how the funding fee is currently broken down for VA purchase loans.

Current VA Funding Fee for Purchase Loans

Veteran Type Down Payment 1st Use After 1st Use
Regular Military None 2.15% 3.3%
Regular Military 5% or more 1.50% 1.50%
Regular Military 10% or more 1.25% 1.25%
Reserves/National Guard None 2.4% 3.3%
Reserves/National Guard 5% or more 1.75% 1.75%
Reserves/National Guard 10% or more 1.5% 1.5%

The bill enshrining this exemption into law was signed in late June 2019.

This change will save qualified VA buyers thousands of dollars. The average VA loan in 2018 was about $265,000, which means buyers are typically paying about $5,700 to $8,700 depending on their service history and prior use of the benefit.

Eligible borrowers will actually save even more next year, as this new legislation also increases VA home loan fees for the next two years.

VA Funding Fee Increasing in 2020

The Blue Water bill raises the funding fee slightly for two years, starting in 2020. The fee will increase from 2.15 percent to 2.3 percent for first-use, and 3.6 percent for subsequent zero-down loans.

The bill equalizes fees for National Guard and Reserve borrowers, who previously had been paying slightly higher funding fees.

Two-Year Increase to VA Funding Fee (2020-2021)

Veteran Type Down Payment 1st Use After 1st Use
All Borrowers None 2.3% 3.6%

For example, an active duty Purple Heart recipient who's already used the benefit would save nearly $11,000 on a $300,000 loan because of the fee waiver.

Who Else is Exempt from the Funding Fee?

The VA Funding Fee applies to all VA purchase and refinance loans. This fee goes directly to the Department of Veterans Affairs to ensure the program keeps operating for future generations.

In addition to the Purple Heart waiver, there are other funding fee exemptions available for qualified borrowers, including:

  • Veterans receiving VA compensation for a service-connected disability
  • Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay
  • Eligible surviving spouses

Talk with a Veterans United loan specialist if you have questions about the funding fee and how this new law might impact your homebuying goals.

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