Yes, you can buy discount points on VA loans. The VA funding fee is a separate cost that can be rolled into the loan. Points permanently reduce your rate just like on conventional loans. Compare the total cost including both the points and the funding fee to decide.
VA Loan Points Explained
VA loans allow discount points just like any other loan type. One point costs 1% of the loan amount and typically reduces your rate by about 0.25%. The rate reduction is permanent for the life of the loan. Points are paid at closing and are separate from the VA funding fee.
VA Funding Fee
The VA funding fee is a one-time fee paid to the Department of Veterans Affairs. It ranges from 0.5% to 3.3% of the loan amount depending on your down payment and whether it is your first use of the benefit. The funding fee can be rolled into the loan amount. It is separate from discount points and does not affect your rate.
Cost Comparison
On a $300K VA loan: if you are a first-time user with no down payment, the funding fee is 2.15% ($6,450) and can be financed. Adding one point ($3,000) brings your total upfront cost to $9,450 financed or $3,000 paid at closing. The point reduces your rate from say 6.75% to 6.5%, saving about $47 per month. Break-even on the point is about 64 months.
When Points Make Sense
Points make sense on VA loans when you plan to stay in the home long enough to reach break-even (typically 5-6 years) and you have extra cash at closing. VA loans already have competitive rates, so the marginal benefit of points is smaller than on some other loan types. But if you want the absolute lowest rate, points can still be worthwhile.