A Republican proposal to impose higher fees on mortgages for military members and veterans — which in some cases would increase the cost of borrowing by a thousand dollars or more — is being scaled back amid significant opposition from veterans groups and lenders.
At a time when home prices remain persistently high, the Republican proposal in Congress would have made Department of Veterans Affairs home loans more expensive for many borrowers, including first-time buyers.
The higher loan fees were proposed to fund benefit increases for hundreds of thousands of survivors of service members killed in the line of duty, as well as about 7,000 severely disabled veterans who require regular, medically supervised home care.
However, most of the higher charges were dropped last week. A revised proposal would increase mortgage refinance fees but leave VA loan fees unchanged for buyers, according to an email from Kathleen McCarthy, a spokeswoman for the House Veterans Affairs Committee under its chairman, Rep. Mike Bost, Republican of Illinois.
The refinancing fee would still nearly triple to 1.4 percent from the current 0.5 percent under the new proposal, Ms. McCarthy said. And the proposal would double the borrowing fee from 0.5 percent to 1 percent. It would also expand eligibility for VA loans to more National Guard and Reserve members, while charging an additional 1 percent fee to the newly eligible borrowers.
In fiscal year 2025, which ended in September, more than 528,000 VA loans were issued, including nearly 120,000 refinances. (Refinances were popular in 2025 when mortgage rates fell.)
Further changes could be made as the proposal moves through the legislative process.
What would be the impact of benefits for survivors and disabled veterans?
A proposed $10,000 increase in annual benefits for “catastrophically” disabled veterans remains in the bill, Ms. McCarthy said. An increase in survivor benefits also remains, she said, but will be reduced from the originally proposed rate of 5 percent over five years to ensure the bill meets House budget rules. The new tariff has yet to be determined.
When Edgar Edmundson testified about the bill last year, he spoke painfully on behalf of his son, Sgt. Eric Edmundson, who was severely disabled at age 25 by a roadside bomb while serving in Iraq. He cannot speak, cannot live independently and has been dependent on around-the-clock care for 20 years.
“Catastrophic injuries don’t get easier with age,” Mr. Edmundson said. “They’re getting tougher.” The proposed benefit increases are “a lifeline” that would help veterans and their families live with dignity, he said.
Why did veterans groups and lenders oppose increasing loan fees?
The bill, H.R. 6047, was proposed in November by Representative Tom Barrett, Republican of Michigan, and co-sponsored by Mr. Bost and others.
At a hearing in December, Mr. Bost said in prepared remarks that the bill was the first “realistic attempt” in years to expand VA survivor benefits. However, the increases required “offset” to pay for them under House budget rules. Mr. Bost then proposed the higher loan fee as an amendment to the bill.
But even as veterans organizations said they strongly supported the proposal’s benefit increases for survivors and severely disabled veterans, they opposed funding them by charging higher home loan fees.
“We believe that funding benefits for one group of veterans by deducting the earned benefits of another is fundamentally wrong,” a coalition of advocacy groups, including Common Defense and the Union Veterans Council, said in a statement to the House committee.
Community Home Lenders of America, a trade group for small and medium-sized mortgage lenders, said current loan fee rates are already “well above” the level needed to keep the VA mortgage program on solid financial footing. “This is not fair to those who serve,” said a Jan. 12 letter to the Veterans Affairs Committee. It urged the committee to “look elsewhere” for opportunities to fund the increased benefits.
Rep. Mark Takano of California, the top Democrat on the committee, said in an emailed statement that Republicans who control Congress and the White House “can certainly find the resources to meet the needs of our veterans rather than veterans footing the bill.”
How do VA loans work?
To make home ownership more affordable for those who have served in the military, the Department of Veterans Affairs guarantees payment of a portion of mortgages taken out by private lenders such as banks and credit unions. The guarantee reduces lenders’ risk if a borrower defaults on a loan by allowing them to waive down payments and offer lower interest rates than traditional mortgages.
VA loans are available to veterans, active military, National Guard and Reserve members, and surviving spouses, provided they meet eligibility requirements. There is no federal minimum credit score to qualify, but lenders typically set their own thresholds.
VA loans do not require borrowers to make a down payment or pay mortgage insurance, as is common with traditional home loans. However, if they make a down payment of less than 5 percent, they will be charged a “promotion fee” of 2.15 percent of the loan, unless they are exempt due to incapacity. (Fees may be lower for larger deposits.)
The finance fee can be paid upfront, but most borrowers factor it into the loan, increasing the amount they pay over time. This also means that it takes longer to build up equity in your home.
What impact would the higher fees have had?
Under the earlier proposal, the fee for a first-time borrower would have increased to 2.45 percent. For an average VA loan of about $400,000, the fee would be $8,600 under the current interest rate of 2.15 percent. The new tariff would have increased the fee by $1,200 to $9,800.
Fees for “follow-on” loans – loans taken out to buy another home after selling the first – would have risen from 3.3 percent to 4.3 percent.
The higher fees would have been in effect until the end of 2035.
The drop in higher interest rates is beneficial for potential homebuyers like Andrew Reef, 36, a Marine Corps veteran who works in sales for a data security company. Mr. Reef and his wife rent an apartment in Northern Virginia, he said, and have started looking into buying a house because they have a young daughter and are expecting a baby this summer. Hearing about the proposed fee increases was “disturbing,” he said, “particularly at a time when homes are more affordable than ever.”
To refinance a $400,000 loan, the fee is $2,000 at the current proposed rate of 0.5 percent and $5,600 at the current proposed rate of 1.4 percent.
Have VA loan fees ever increased?
In 2019, a temporary increase in some fees was enacted to fund an expansion of benefits for service members affected by exposure to Agent Orange, a defoliant used in the Vietnam War. However, according to the Community Home Lenders Group, this increase was less than recent proposals and was phased out in 2023.
How do I apply for a VA loan?
Veterans and military personnel must obtain a certificate of eligibility from the government or have their lender apply on their behalf. Suitability depends on criteria such as length of service.
Are there other low-cost mortgage options?
Other government-backed loan programs offer low down payments but do not offer 100 percent financing like VA loans. The Federal Housing Administration, for example, typically insures loans with down payments of 3.5 percent or more. However, mortgage insurance requires borrowers to pay an upfront fee that may be added to the mortgage amount. Other low down payment options are described here by my colleagues Ron Lieber and Tara Siegel Bernard.