Nationwide Mortgage Licensing System (NMLS) Practice Exam

Who benefits primarily from a VA loan's funding fee?

1. The borrower

2. The lender

3. The government

4. The real estate agent

The correct answer is: The government

The correct answer highlights that the funding fee associated with a VA loan primarily benefits the government. This fee is a small percentage of the loan amount and is used to support the VA loan program, ensuring its sustainability and enabling it to offer benefits to veterans, active-duty service members, and certain members of the National Guard and Reserves. The funding fee helps to cover the costs of the program, including losses associated with loans that may default. By funding the VA loan program in this way, the government can continue to provide these loans without requiring a down payment or private mortgage insurance (PMI), which greatly enhances affordability for veterans and their families. While the other stakeholders such as borrowers, lenders, and real estate agents are involved in the transaction and may see indirect benefits, the primary purpose of the funding fee is to sustain the government’s ability to provide veterans with advantageous loan options.