The second VA loan costs more, and nobody asks
A VA loan has no monthly mortgage insurance at all. What it has instead is a single financed fee, and that fee is one of the few numbers in American mortgage lending that changes based on a question no comparison site asks: whether you have used the benefit before.
The case these numbers come from
What this case assumes
- $96,300 / yearAssumed
The median income of a Hispanic buyer as measured by the realtors’ association, not this person’s income. It is a segment anchor: it moves the debt-to-income ratio and, through it, the DTI surcharge the mortgage insurer applies.
- $0 / monthAssumed
No recurring debts were declared. Zero is the floor: any real debt raises the debt-to-income ratio, and above certain bands it makes the private mortgage insurance premium more expensive.
- 7 yearsAssumed
The axis the whole product compares on, and the research does not fix it. It is field 20 of the 20 that matter: it has to be asked, not inferred.
- 1.245% / yearSourced
The effective Texas rate, computed from the Census survey using the homebuilders’ association method. The bill itself is set by the county and the school district, not by the state.
- $2,251 / yearAssumed
The Texas median, interpolated from the Census bracket distribution for households with a mortgage, with a measured error band. It is not a quote from an insurer.
- not knownAssumed
The area median income for Fort Worth is not known here. If qualifying income lands at or below 100% of it and there is a first-time buyer, every price adjustment is waived. Here they are charged, which is the expensive scenario.
Every figure on this page is computed from this case by the same engine that runs the comparison screen. Nothing is typed in by hand.
01No monthly insurance, one fee instead
Every other low-down-payment program in the country charges you every month for the privilege. FHA charges a premium that may run the full term. Conventional charges private insurance until the balance falls far enough. USDA charges an annual fee for the life of the loan.
VA charges none of them. There is no monthly mortgage insurance on a VA loan — not a reduced one, not a cancellable one, none. What there is instead is the funding fee: a single percentage of the loan, normally financed, paid once.
That structure changes how you have to compare it. A monthly premium is a cost that scales with how long you keep the loan; the funding fee is a cost you pay in full whether you keep the house thirty years or three. On a short horizon the fee is expensive per year of ownership. On a long one it is the cheapest insurance structure in the catalogue — and if you are exempt, it is free.
What is not on a VA payment
What the engine computes
Three ways to insure the same house
Plus $7,331 once, financed
Same purchase price, same county, same tax and insurance assumptions. FHA at 3.5% down, conventional at 3% down, VA at nothing down and first use. The VA row has no monthly line at all — that is not a rounding, it is the structure.
02The question nobody asks
On a purchase with nothing down, the funding fee is 2.15% the first time a veteran uses the entitlement. Every subsequent use is 3.30%. That is 115 basis points of the loan amount, for the identical loan, on the identical house, decided by a fact about the borrower’s history that has no bearing on the risk of the loan in front of anyone.
It is also one of exactly two fields that no mortgage comparison site in the United States asks about. Not one. The site will ask for your credit score band, your down payment and your ZIP code, and quote you a VA payment built on the assumption that this is your first time — which, for a veteran buying their second home, understates the cost by a four-figure sum before anyone has discussed a rate.
The fee is normally financed, which means it does not appear as cash at closing. It appears as a bigger balance, a bigger monthly payment and more interest for as long as the loan runs. That is the least visible way for a cost to arrive.
What the engine computes
One question, this much money
First use
2.15%
$9,333 financed into the loan
Every use after that
3.30%
$14,325 financed into the loan
The difference
$4,992
Decided by a question about history, not about risk. And nobody asks it.
The research anchors this at $4,600 on a round $400,000 loan. On this house the loan is a different size, so the engine computes its own figure rather than borrowing the other one.
| Scenario | Fee rate | Fee financed | Loan amount | Monthly payment | Cost over 7 years |
|---|---|---|---|---|---|
| Exempt · nothing down | 0.00% | — | $434,100 | $3,458.14 | $290,484 |
| First use · nothing down | 2.15% | $9,333 | $443,433 | $3,518.78 | $295,577 |
| Subsequent use · nothing down | 3.30% | $14,325 | $448,425 | $3,551.21 | $298,302 |
| Subsequent use · 5% down | 1.50% | $6,186 | $418,581 | $3,357.32 | $303,720 |
Ordering ruleRows ordered by total cost at the declared holding horizon, ascending — the same rule the comparison screen uses.
SourcePurchase, primary residence, 30-year fixed, same county and same tax and insurance assumptions throughout. The fee is financed in every row, which is the normal practice.
03What 5% down does to it
Here is the part that turns this from a complaint into a decision. The subsequent-use penalty only exists in the zero-down column. Put 5% down and the fee is the same 1.50% for a first-time user and a repeat user alike — the two tables converge.
So for a veteran on their second home, five percent down does something it does not do on any other program: it removes a penalty rather than just reducing a balance. The fee drops by more than half.
Whether that is worth doing is, again, a question about the money you have and how long you are staying — which is why the total cost column above is calculated to the horizon this buyer declared rather than presented as a monthly payment. A smaller fee bought with a larger down payment is not automatically cheaper; it is cheaper on some horizons and not on others, and the honest answer is the one that names the horizon.
What the engine computes
The fee schedule, both columns
| Down payment | First use | Subsequent use | Gap |
|---|---|---|---|
| Less than 5% | 2.15% | 3.30% | +1.15% |
| 5% or more | 1.50% | 1.50% | none |
| 10% or more | 1.25% | 1.25% | none |
What 5% down saves a repeat user, on this house
$8,139
The fee falls from 3.30% to 1.50%. Whether it is worth the extra cash depends on the horizon — see the ordered table above.
The convergence at 5% is in the fee schedule itself, not an interpretation: first use and subsequent use are charged the same from 5% down upward.
04And what takes it to zero
Five circumstances remove the funding fee entirely. Not reduce it — remove it. A veteran who is exempt and puts nothing down pays no fee and no monthly mortgage insurance, which makes it, arithmetically, the cheapest financing structure available to anyone in the United States.
The exemptions are not obscure and they are not rare, and the first one in particular covers a very large number of people who do not think of themselves as exempt. If any of these describes you, it is worth confirming in writing before anything is quoted, because a fee that was charged and should not have been is a refund conversation later instead of a smaller loan now.
What the engine computes
The five exemptions
- 1You receive VA compensation for a service-connected disability
- 2You are entitled to that compensation but receive retirement or active-duty pay instead
- 3You are a surviving spouse receiving Dependency and Indemnity Compensation
- 4You have a proposed or memorandum rating issued before closing
- 5You are an active-duty service member with a Purple Heart on or before the closing date
Exempt, nothing down
$290,484
Total cost over 7 years. No fee, no monthly insurance, no down payment.
What the exemption is worth here
$7,818
Against the subsequent-use scenario, over the same seven years.
From the Department of Veterans Affairs. A proposed or memorandum rating issued before closing counts — the rating does not have to be final. 5 grounds are recorded in the engine and 5 are listed here; if those two numbers ever disagree, this page is out of date.
05The test that actually decides the file
Ask most comparison tools what qualifies a VA loan and they will tell you about credit score and debt-to-income, because that is what they can compute. VA underwriting does not work that way, and the difference is not academic.
The 41% debt-to-income figure that gets quoted as the VA limit is not a limit. It is a documentation trigger. What decides the file is residual income: a specific number of dollars, by region and household size, that has to be left over every month after the housing payment and every other obligation. And if residual income exceeds the guideline by 20% or more, the regulation says no justification and no second review are required — which means a file over 41% can pass without an argument.
Everyone in the household counts, including a spouse who is not on the note. That is unusual, and it cuts both ways: it raises the requirement for a larger family, and it is a rule that a lender working from a generic checklist can get wrong in either direction.
Below is what the regulation requires for this region and this household size, and what this case actually leaves over. One caveat we will state rather than hide: the regulation computes residual income after federal and state taxes, social security and a maintenance and utilities allowance. Those deductions are not modelled here, so the “available” figure is a ceiling, not a result.
What the engine computes
Residual income on this file
Table figure for this region and household size, loans of $80,000 and above. Household counted in full. Taxes and the maintenance allowance are not deducted here, so treat the available figure as an upper bound.
What the engine declares(5)
SIN AVALUO · Verified
No appraisal was supplied, so LTV runs on the price. On a purchase the value is the LOWER of price and appraisal, so a low appraisal would raise the LTV and could move the pricing band.
No se recibió avalúo: el LTV se calcula sobre el precio. En compra el valor es el MENOR entre precio y avalúo, así que un avalúo bajo subiría el LTV y podría mover la banda.
LLPA NO APLICA · Verified
Loan-level price adjustments belong to Fannie and Freddie, so they do not apply to FHA, VA or USDA, which each have their own premium and fee structure. And a jumbo carries none either: by definition the Enterprises cannot buy it, so neither matrix governs it. The risk adjustment does exist, each investor sets it, and it is not public — this engine does not estimate it.
Los LLPA / Credit Fees son de Fannie y Freddie: no aplican a FHA, VA ni USDA, que tienen su propia estructura de primas y comisiones.
VA RESIDUAL DEDUCCIONES NO MODELADAS · Not verified
VA residual income is computed on NET income and also deducts federal and state taxes, social security and an estimate of home maintenance and utilities. Those deductions were not verified in this project and are not modelled, so the residual shown is a ceiling.
El residual del VA se calcula sobre ingreso NETO y descuenta además impuestos federales y estatales, seguridad social y una estimación de mantenimiento y servicios de la vivienda. Esas deducciones no están verificadas en este proyecto y no se modelan: el residual mostrado es un TECHO. Pásalas en `deduccionesAdicionales` cuando se verifiquen.
APR EXCLUSIONES · Verified
Charges excluded from the finance charge under 1026.4(c)(7) when bona fide — title, appraisal, credit report, survey, document preparation — and under 1026.4(c)(5) for seller’s points. The legal APR leaves out precisely what varies most between lenders.
Excluidos del finance charge 0 cargo(s) por 1026.4(c)(7) —título, tasación, credit report, levantamiento, preparación de documentos, si son bona fide— y por 1026.4(c)(5) —seller points—. El APR legal deja fuera lo más variable entre prestamistas.
APR TOLERANCIA · Verified
The law treats an APR as accurate if it is within 0.125 percentage points. Differences smaller than that are not informative, and a ranking must not pretend to a precision the regulator does not require.
La ley considera exacto un APR que no se desvíe más de 0.125 puntos porcentuales (1/8). Diferencias menores NO son informativas y el ranking no debe fingir una precisión que la ley no exige.
06What to do with this
- 1
Say out loud whether it is a first or subsequent use
The words to use: “This is a subsequent use of my entitlement — please quote the funding fee at 3.30% unless I am exempt.” Volunteering it costs you nothing and stops you comparing quotes that were built on different assumptions.
- 2
If it is a subsequent use, price the 5% down version too
It is the one place in the fee schedule where a down payment removes a penalty rather than just shrinking a loan. Ask for both and compare them at the number of years you actually intend to stay.
- 3
Check the exemption before you accept the fee
A proposed or memorandum rating issued before closing is enough. If a rating decision is pending, say so — the timing of the paperwork can be worth thousands.
- 4
Ask for the residual income calculation in writing
The words to use: “What is my residual income figure and what does the table require for my region and household size?” It is the number that decides the file. A lender who quotes you only a debt-to-income ratio is describing a different program.
- 5
Count the whole household, including anyone not on the loan
The regulation counts every occupant, spouse on the note or not. Getting this wrong in your favour is a denial later; getting it wrong against you is a loan you were told you could not have.