A veteran refinances a $240,000 VA loan into a lower rate with no cash out, using an interest rate reduction refinancing loan. Assuming the veteran is not exempt and the fee base is $240,000, what IRRRL funding fee applies?
Correct Answer
D) The funding fee is 0.5% of the loan, or $1,200
D. The nonexempt IRRRL funding fee is $1,200. The VA table lists a 0.5% funding fee for an IRRRL. Apply that rate to the supplied fee base: $240,000 × 0.005 = $1,200. Scope and exceptions: The question excludes an exemption and supplies the fee base. An actual refinance still needs eligibility, benefit and cost review; a smaller funding fee alone does not establish that refinancing is worthwhile. Source: Other VA home loan types: IRRRL — https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/
Why This Is the Correct Answer
D. The nonexempt IRRRL funding fee is $1,200. The VA table lists a 0.5% funding fee for an IRRRL. Apply that rate to the supplied fee base: $240,000 × 0.005 = $1,200. Scope and exceptions: The question excludes an exemption and supplies the fee base. An actual refinance still needs eligibility, benefit and cost review; a smaller funding fee alone does not establish that refinancing is worthwhile.
Why the Other Options Are Wrong
Option A: The funding fee is 2.15% of the loan, or $5,160
2.15% is not the IRRRL rate.
Option B: The funding fee is 3.3% of the loan, or $7,920
3.3% is not the IRRRL rate.
Option C: No funding fee applies to any VA refinance transaction
VA refinancing is not universally funding-fee exempt.
Exam Tip
Identify the VA loan type and exemption status before calculating the funding fee.
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