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.
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.
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.
| 0% down | 2.15% of loan amount |
| 5%–9.99% down | 1.50% |
| 10%+ down | 1.25% |
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.
| Subsequent-use purchase, 0% down | 3.30% |
| Subsequent-use purchase, 5%–9.99% down | 1.50% |
| Subsequent-use purchase, 10%+ down | 1.25% |
| IRRRL (streamline refinance) | 0.50% |
| Cash-out refinance | 2.15% first use / 3.30% subsequent |
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.
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.
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.
| Funding fee amount | $8,600 |
| Financed into loan | New loan = $408,600 |
| Additional monthly payment at 6.5% | ≈ $54 / mo |
| Total additional interest over 30 years | ≈ $11,000 |
| Alternative: pay $8,600 at closing | Frees $54/mo, requires $8,600 cash now |
Common Misconceptions
The funding fee is the single most misunderstood piece of the VA loan. A quick correction of the three most common ones:
- 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.