VA Loan Funding Fee: Complete Guide for 2026

The VA funding fee is a one-time charge that helps sustain the VA home loan program for future generations of veterans. Unlike private mortgage insurance, it is paid once — not monthly — and many veterans are exempt from it entirely. This guide explains every detail you need to make an informed decision.

What Is the VA Funding Fee?

The VA funding fee is a one-time payment required on most VA-guaranteed home loans. It is paid to the Department of Veterans Affairs — not to the lender — and goes directly into a fund that sustains the VA loan program without relying on taxpayer appropriations. The program has been self-sustaining through this mechanism for decades.

The funding fee is calculated as a percentage of the total loan amount. It can be:

Paid at closing as a cash payment (reduces your monthly payment but requires cash on hand)
Financed into the loan (adds a small amount to your monthly payment but requires no cash at closing)

For example, a $400,000 VA purchase loan with a 2.15 percent funding fee generates an $8,600 fee. If financed, the loan balance becomes $408,600. At a 7.0 percent rate over 30 years, that adds approximately $57/month to the payment compared to a $400,000 loan — not $8,600/month. Most VA borrowers choose to finance the fee.

The funding fee is the primary reason VA loans can offer zero down payment and no PMI — it replaces both the mortgage insurance premium and the down payment's risk-reduction function in the lender's calculation, backed by the VA's guarantee.

What Are the 2026 VA Funding Fee Rates?

Funding fee rates depend on three factors: the loan type (purchase, cash-out refinance, IRRRL, or assumption), the down payment amount for purchases, and whether it is the borrower's first or subsequent use of the VA loan benefit.

Loan Type	Down Payment	First Use	Subsequent Use
Purchase / Construction	Less than 5%	2.15%	3.30%
Purchase / Construction	5% to 9.99%	1.50%	1.50%
Purchase / Construction	10% or more	1.25%	1.25%
Cash-Out Refinance	N/A (based on equity)	2.15%	3.30%
IRRRL (Streamline Refinance)	N/A	0.50%	0.50%
Loan Assumption	N/A	0.50%	0.50%

Key observations from this table:

Putting 5 percent or more down on a purchase reduces the funding fee from 2.15% to 1.50% (first use). Putting 10 percent down reduces it further to 1.25%. If you have the cash, this tradeoff is worth calculating.
The subsequent use rate with no down payment (3.30%) is significantly higher. Veterans who have used a VA loan before and are buying again with no down payment pay a notably higher fee.
The IRRRL rate of 0.50% is one of the lowest fees in the program, making streamline refinances very cost-efficient.
Cash-out refinances carry the same rate structure as purchase loans — 2.15% first use, 3.30% subsequent — regardless of how much equity is tapped.

Who Is Exempt From the VA Funding Fee?

Several categories of veterans and service members are completely exempt from paying the funding fee. If you are exempt, you save thousands of dollars at closing — and financing the fee is not necessary.

You are exempt if you are:

A veteran receiving VA compensation for a service-connected disability. If the VA has awarded you a disability rating of 10 percent or higher and you are receiving (or entitled to receive) compensation, you are exempt. This is the most common exemption category.
A veteran who would be entitled to VA disability compensation but for receiving military retirement or active-duty pay instead.
A surviving spouse of a veteran who died in service or from a service-connected disability and who is receiving Dependency and Indemnity Compensation (DIC).
An active-duty service member who has received a Purple Heart and is closing the loan on or after the date of the award.

Lenders are required to verify exemption status before charging the funding fee. If you believe you are exempt but your lender has included the funding fee, flag this immediately — exemption verification should happen at the time of loan application, not after closing.

Should You Finance or Pay the VA Funding Fee Upfront?

Most VA borrowers finance the funding fee rather than paying it in cash at closing. Here is a concrete example to help you decide.

Assume a $400,000 VA purchase loan, first use, no down payment. Funding fee = 2.15% × $400,000 = $8,600.

Option	Loan Balance	Monthly P&I (7.0%, 30yr)	Cash at Closing	Total Interest Paid
Pay fee upfront	$400,000	$2,661	$8,600 + other costs	$557,960
Finance the fee	$408,600	$2,718	Other costs only	$569,848
Difference	+$8,600	+$57/month	-$8,600	+$11,888 over 30 years

Financing the fee costs approximately $57 more per month and roughly $11,888 more in total interest over the life of a 30-year loan. Paying upfront saves that interest cost but requires $8,600 in cash at closing on top of other closing costs.

The decision framework: if you have the cash and plan to keep the loan long-term (10+ years), paying upfront saves money. If you are tight on cash, plan to sell or refinance within a few years, or want to keep your capital invested elsewhere, financing is the practical choice. Most VA borrowers finance the fee.

How Does the VA Funding Fee Compare to PMI?

One of the most important financial comparisons for veterans is how the VA funding fee stacks up against the private mortgage insurance they would pay on a conventional loan with no down payment.

Consider a veteran buying a $400,000 home with zero down payment:

VA loan funding fee (2.15%, financed): $8,600 one-time, adding ~$57/month to the payment
Conventional loan PMI (at 0.80% annual rate for 5% LTV scenario, no-down scenario impossible conventionally — but compare at 5% down on $380,000): For a comparable loan, PMI runs roughly $200–$300/month until 20% equity is reached (7–10 years on a standard schedule)

Even in a generous scenario, a veteran financing the 2.15% funding fee will spend approximately $3,420 in the first 5 years on the funding fee's financing cost (as a portion of the $57/month payment above principal parity). A comparable conventional borrower pays PMI for those same 5 years at roughly $250/month — totaling $15,000. The VA loan is dramatically cheaper over any meaningful holding period.

After the VA funding fee is paid (or financed), the veteran has no ongoing mortgage insurance. The conventional borrower keeps paying PMI until they reach 80% LTV — years from now.

How Do You Verify Your VA Funding Fee Exemption Status?

If you believe you may be exempt from the VA funding fee, here is how to confirm your status before closing:

Request your Certificate of Eligibility (COE). Your COE shows your entitlement and, importantly, will indicate if you have a service-connected disability rating that triggers an exemption. You can request a COE through the VA's eBenefits portal at benefits.va.gov/homeloans or through your lender.
Verify your disability rating. If you have a disability rating but are not yet receiving compensation (for example, because your claim is pending or because you receive retirement pay instead), you may still be exempt. Contact the VA regional benefits office to clarify your compensation status.
Notify your lender in writing. Once you have documentation confirming your exempt status — typically a disability award letter or evidence of DIC — provide it to your lender's VA coordinator before the loan is submitted for approval. The exemption must be documented in the loan file.
Check your Closing Disclosure. Review the funding fee line on your Closing Disclosure (CD). If you are exempt and the fee appears, raise it immediately with your lender. Refunds after closing are possible but require additional administrative steps.

Overpayment of the funding fee by exempt veterans does occur. The VA has a process for requesting refunds, but it is far simpler to catch the error before closing.

How Can You Calculate Your VA Loan Costs?

Use the VA Loan Calculator to estimate your funding fee, monthly payment, and how the VA loan compares to a conventional loan for your specific purchase price and down payment. For a comprehensive overview of the VA loan program — including eligibility, benefits, and application steps — see our guide What Is a VA Loan? Benefits, Requirements, and How to Apply.

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Frequently Asked Questions

Can the VA funding fee be rolled into the loan amount?

Yes. Most VA borrowers choose to finance the funding fee rather than paying it in cash at closing. For example, a 2.15% fee on a $400,000 loan adds $8,600 to the balance, increasing the monthly payment by roughly $57. Financing the fee costs about $11,888 more in total interest over 30 years but requires no extra cash at closing.

Who is exempt from paying the VA funding fee?

You are exempt if you receive VA compensation for a service-connected disability (10% rating or higher), if you would qualify for compensation but receive military retirement or active-duty pay instead, if you're a surviving spouse receiving Dependency and Indemnity Compensation (DIC), or if you're an active-duty service member who has received a Purple Heart. Lenders are required to verify your exempt status before charging the fee.

Is the VA funding fee tax deductible?

The VA funding fee was deductible as mortgage insurance in past tax years under temporary provisions, but this deduction has historically expired and been extended on a year-by-year basis. Check IRS Publication 936 and your current year's tax guidance, or consult a tax professional, to determine whether it is deductible in the year you're filing. Do not rely on this deduction without confirming it is currently in effect.

What is the difference between first use and subsequent use funding fee rates?

First use means it's the first time you are using a VA loan. Subsequent use applies every time after that. For a purchase with less than 5% down, the first-use fee is 2.15% while subsequent use jumps to 3.30%. If you put 5% or more down, both first and subsequent use fees are the same (1.50% at 5–9.99%, 1.25% at 10%+), which removes any disadvantage for repeat VA loan users who make a larger down payment.

Does my VA disability rating affect my funding fee?

Yes — significantly. Any service-connected disability rating of 10% or higher that results in VA compensation payments makes you completely exempt from the funding fee, regardless of the loan amount or whether it's your first or subsequent use. This exemption can save you thousands of dollars. If your rating is pending at the time of closing and later approved retroactively, you may be entitled to a refund of the fee you paid.

What is the funding fee rate for a VA streamline refinance (IRRRL)?

The VA IRRRL (Interest Rate Reduction Refinance Loan) carries a funding fee of just 0.50%, the same for both first and subsequent use. This is significantly lower than the purchase or cash-out refinance rates, making streamline refinances one of the most cost-efficient ways for VA borrowers to lower their interest rate when market rates drop.

This article is for informational purposes only and does not constitute financial, legal, or mortgage advice. VA funding fee rates are set by federal law and may change. Verify current rates and exemption criteria at VA.gov or with a VA-approved lender before making financial decisions.