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The VA Funding Fee, Explained

How the fee is calculated, when it's waived, and whether to roll it in or pay it at closing.

8 min
Read time
2026-06-20
Last updated
VA Loans
Topic
On this page01The Short Version02Current Funding Fee Schedule03Subsequent Use and Refinance Rates04Who Is Exempt05Financed vs. Paid at Closing06Common Misconceptions
01

The Short Version

The VA funding fee is a one-time fee that funds the VA loan program itself, letting the VA offer $0 down, no monthly mortgage insurance, and better pricing without taxpayer subsidy. It's charged as a percentage of the loan amount, varies by use and down payment, and can be financed into the loan.

Many veterans are exempt entirely - most notably anyone receiving VA disability compensation. If you're exempt, verify that at application, not after closing.

What you'll learn in this guide
  1. 02Current Funding Fee Schedule
  2. 03Subsequent Use and Refinance Rates
  3. 04Who Is Exempt
  4. 05Financed vs. Paid at Closing
  5. 06Common Misconceptions
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Plain-English

No jargon, real examples

Written by

Licensed advisors

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VA Loans

Buyers & homeowners

02

Current Funding Fee Schedule

The fee changes based on three things: whether this is your first VA loan (or a subsequent use), your down payment amount, and whether it's a purchase or refinance. Table below reflects the standard 2020+ schedule; verify current rates with your loan officer before making decisions.

Purchase Funding Fee - First Use
0% down2.15% of loan amount
5%–9.99% down1.50%
10%+ down1.25%
First use = first-ever VA loan, or first use after full entitlement restoration.
03

Subsequent Use and Refinance Rates

Second and later VA purchases carry a higher funding fee if you put less than 5% down. Streamline refinances (IRRRL) and cash-out refinances have their own fee schedules.

Purchase Funding Fee - Subsequent Use, Plus Refinance Rates
Subsequent-use purchase, 0% down3.30%
Subsequent-use purchase, 5%–9.99% down1.50%
Subsequent-use purchase, 10%+ down1.25%
IRRRL (streamline refinance)0.50%
Cash-out refinance2.15% first use / 3.30% subsequent
National Guard and Reserves paid the same rates as active duty as of 2020+. Verify current schedule with a loan advisor.
04Section 4

Who Is Exempt

The funding fee is waived entirely for several categories. This is worth thousands of dollars - verify exemption on day one.

  • Veterans receiving VA disability compensation at any percentage.
  • Veterans who would be entitled to compensation but for receipt of retirement pay.
  • Surviving spouses receiving Dependency and Indemnity Compensation (DIC).
  • Active-duty service members who received a Purple Heart on or before the date of loan closing.
  • Certain National Guard and Reserve members with qualifying service-connected disability status.
If Your Disability Rating Comes Through After Closing

You may be eligible for a refund of the funding fee if the effective date of your VA disability rating is on or before the loan closing date. This is a documented process through the VA - worth checking if you got a rating decision that was retroactive.

05

Financed vs. Paid at Closing

Almost every VA borrower finances the funding fee into the loan. Doing so preserves cash for reserves, moving expenses, and post-close life. The math trade-off is small.

Illustrative - $400,000 VA Purchase, 0% Down, 2.15% Funding Fee
Funding fee amount$8,600
Financed into loanNew loan = $408,600
Additional monthly payment at 6.5%≈ $54 / mo
Total additional interest over 30 years≈ $11,000
Alternative: pay $8,600 at closingFrees $54/mo, requires $8,600 cash now
Break-even between the two paths depends on your opportunity cost for the $8,600. Most borrowers finance it.
06

Common Misconceptions

The funding fee is the single most misunderstood piece of the VA loan. A quick correction of the three most common ones:

Key points
  • It's not monthly. There's no monthly mortgage insurance on a VA loan - the funding fee is one-time.
  • It's not paid to the lender. The fee goes to the VA and funds the program itself.
  • It's not permanent. If you refinance to IRRRL later, the new fee is 0.50% - much lower than the original.
FAQ

Frequently Asked

Yes. Your Certificate of Eligibility (COE) reflects exemption status, and we verify it during application. If your rating changes, you notify the VA to update your COE.
Keep learning

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The Complete VA Loan Guide

Eligibility, entitlement, funding fees, and why the VA loan is often the single best benefit a veteran has.

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