Congress Is Considering Higher VA Loan Fees: What Veterans and Military Homebuyers Should Know

If you’re a veteran, active duty service member, or military family using VA loans in Northern California or anywhere in the country, you need to be aware of a bill Congress is considering that could make certain VA loan transactions more expensive. While the VA loan program remains a cornerstone benefit for military homebuyers, the proposed changes focus specifically on refinancing and loan assumptions, potentially altering the financial landscape for many borrowers. Understanding these changes is crucial for making informed real estate decisions, especially in a market like the Bay Area where home prices are high and every dollar counts.

What Exactly Is Being Proposed?

The legislation in question, H.R. 9237, is part of a broader veterans benefits package currently under consideration in Congress. Among its provisions is a proposal to increase fees associated with two specific VA loan transactions:

• VA Interest Rate Reduction Refinance Loans (IRRRLs), also known as VA Streamline Refinances
• VA loan assumptions

These changes do not affect the standard VA funding fee for a home purchase, which remains unchanged. However, because many veterans and military families rely on IRRRLs to lower monthly payments and leverage historically low interest rates, and because VA loan assumptions have become a strategic option in hot markets, these fee hikes could have real financial consequences.

Breaking Down the Fee Increases

Let’s look at the numbers to understand how this would work in practice.

Currently, the VA IRRRL funding fee is 0.50%. This fee is paid at closing but can often be rolled into the loan balance rather than paid upfront. The proposed bill would increase this fee to 1.42%, nearly tripling the cost.

For example, if you’re refinancing an $800,000 VA loan in the Bay Area using an IRRRL, your funding fee would jump from $4,000 to $11,360. That $7,360 difference could mean higher monthly payments or a larger loan balance from day one.

Similarly, the VA loan assumption fee would double from 0.50% to 1.00%. Loan assumptions have gained popularity in regions like the Bay Area, where some VA mortgages were locked in years ago at interest rates well below today’s market. For buyers eligible to assume those loans, doubling the fee could reduce some of the inherent savings of this strategy.

Why This Matters Locally: The Bay Area and Northern California

In Contra Costa County and the wider Bay Area, veteran families face some of the highest housing costs in the nation. Median home prices in cities like Hercules, San Jose, and Oakland routinely exceed $700,000, making the financial benefits of the VA loan program essential for affordability.

Many military families stationed at Travis Air Force Base or relocating to Northern California rely on VA loans not only for home purchases but also to refinance when interest rates drop. The IRRRL is especially popular because it’s designed to be a streamlined process with less documentation and underwriting.

By increasing fees on IRRRLs and loan assumptions, the proposed legislation could discourage refinancing, pushing some veterans to hold higher-rate loans longer than they otherwise would. This could impact monthly budgets, reduce disposable income, and ultimately make homeownership less affordable.

As a military spouse and REALTOR® serving the Bay Area, I’ve seen firsthand how even small increases in fees can add stress and complexity to the home buying and refinancing process. For families who may not have large cash reserves, especially those PCSing or facing other military-related moves, these costs are far from trivial.

What VA Loan Assumptions Mean for Buyers and Sellers

A VA loan assumption allows a qualified buyer to take over the seller’s existing VA mortgage, including its interest rate and remaining balance. This can be a powerful option when current rates are higher than the original loan’s terms.

In high-cost markets like San Francisco and the East Bay, an assumable VA loan with a below-market interest rate can be a significant selling point. Buyers gain the advantage of a lower rate without having to qualify for a new loan under today’s standards, which can be stricter.

The proposed fee increase to 1.00% for assumptions would double the cost for buyers and sellers. While still potentially advantageous compared to prevailing market rates, this hike may reduce some of the appeal, particularly for buyers who are comparing options in a competitive market.

Separating Fact from Fiction: What the Proposal Does Not Change

It’s important to clarify that the proposal does not raise the VA funding fee for standard home purchases. This means veterans and military families buying a home with a VA loan will not see an increase in the upfront funding fee, which remains a critical benefit.

The distinction matters because some media headlines have generalized the fee increases, causing confusion and concern. If you are buying your first home or using a VA loan for a purchase, your funding fee remains the same unless other legislation passes.

The focus on IRRRLs and assumptions reflects a narrower scope, but one that still affects a large segment of the military community who use these options to save money or navigate the real estate market more flexibly.

What Can Military Homebuyers and Veterans Do Now?

Since this is proposed legislation and not yet law, there is still time for veterans, military families, and those serving them in real estate and lending to make their voices heard.

• Reach out to your U.S. Representative and Senators to express your concerns or support for the bill’s provisions affecting VA loan fees.
• Engage with local veterans organizations and advocacy groups that monitor VA benefits and housing policy.
• Stay informed by following updates from trusted real estate professionals familiar with VA loans and military relocations.
• Consult with your lender or REALTOR® about how any changes could impact your refinancing or home purchase plans.

For military families in the Bay Area, especially those connected to Travis AFB or other installations, understanding these potential changes can inform timing decisions about refinancing or buying a home. In some cases, moving forward before any fee increases take effect could save thousands.

"As a military spouse and REALTOR®, I know that VA loan benefits are more than just numbers, they’re part of the financial foundation that helps military families put down roots and build wealth in communities like ours."

I’ll continue to follow this legislation closely and share updates that matter to veterans, active duty service members, and military families navigating the housing market in Northern California.