What the funding fee is
The VA funding fee is a one-time charge paid to the Department of Veterans Affairs on every VA-guaranteed loan. It funds the VA loan guaranty program so the program stays self-sustaining — that's why VA loans need no monthly mortgage insurance.
It's a percentage of your loan amount, and it can be paid in cash at closing OR (much more common) rolled into the loan balance so you finance it over the life of the mortgage.
2026 funding fee rate tables
Purchase & construction loans
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.3% |
| 5% to 9.99% | 1.5% | 1.5% |
| 10% or more | 1.25% | 1.25% |
Cash-out refinance
| Use | Fee |
|---|---|
| First use | 2.15% |
| Subsequent use | 3.3% |
IRRRL (streamline refinance)
Flat 0.5% regardless of use — the cheapest funding fee in the program.
Who's exempt (and pays $0)
- ✓ Veterans receiving VA disability compensation (any %)
- ✓ Veterans eligible for disability but receiving retirement pay instead
- ✓ Active-duty Purple Heart recipients
- ✓ Surviving spouses receiving Dependency & Indemnity Compensation (DIC)
- ✓ Service members currently receiving pre-discharge disability rating
If you're exempt, your Certificate of Eligibility (COE) will say so. If yours doesn't reflect a recent disability rating, your loan officer can request a corrected COE from the VA — this is a very common fix in the first week of a file.
The math on a real loan
$400,000 purchase, first VA use, 0% down:
Funding fee = $400,000 × 2.15% = $8,600
Financed into the loan:
New loan amount: $408,600
Extra monthly P&I at 6.75%: ~$55/month
Same loan for a disabled veteran: funding fee is $0. Loan amount stays at $400,000. That's a real, ongoing $55/month savings — plus $8,600 less owed on day one.
Even with the fee, VA still usually wins
Compare 30 years of VA funding fee vs 30 years of FHA MIP on the same $400K loan:
- VA funding fee (financed): ~$19,800 of extra interest over 30 years
- FHA MIP (0.55% annual for life of loan): ~$56,000+ over 30 years
For eligible veterans, VA is almost always the cheapest program on the table — even without the exemption. With the exemption, it's not even a contest.
Common mistakes I see
- Assuming you can't use VA twice. You can. First-time buyers, current homeowners, and veterans who've paid off a previous VA loan all have entitlement available. Second use just has a slightly higher fee unless you put 5%+ down.
- Paying the fee in cash by default. Rolling it into the loan preserves your closing cash for reserves and moving costs. Ask before you agree.
- Not requesting an updated COE after a disability rating change. The exemption is retroactive — buyers who close before their rating is on the COE can request a refund of the funding fee from the VA.
Where to go from here
- Compare VA against FHA and Conventional
- VA's residual income test — often more generous than DTI ratios alone.
- Take the Scorecard for a full VA readiness check.