Quick Answer
The VA funding fee is a one-time fee the VA charges to help keep the VA loan program running. It is typically a percentage of your loan amount that depends on your down payment and whether this is your first use or a later use of your benefit. It can usually be financed into the loan rather than paid at closing, and it is commonly waived for veterans with a service-connected disability rated 10% or higher, as well as in some cases for certain recipients. Because the current rate and waiver rules change, always confirm them for your own situation.
Get help planning your VA loan and the funding fee.
The VA funding fee is the VA loan's one upfront cost. Unlike an FHA or conventional loan, an eligible VA loan carries no recurring monthly mortgage insurance, and the funding fee is the trade-off that keeps the program funded. It can often be rolled into the loan, and many veterans never pay it at all because a qualifying disability rating waives it. Plan my VA loan or military move.
What the VA Funding Fee Is
Think of the VA funding fee as the one-time cost that helps the VA loan program keep running. It is charged on most VA loans, and it is what helps offset the cost of the program to taxpayers. For most borrowers it can be rolled into the loan amount rather than paid out of pocket at closing, which keeps more money in your pocket on the day you buy. It is not an extra lender charge or a hidden cost; it is a straightforward fee tied to how the VA loan works.
How It's Calculated
The fee is a percentage of your loan amount, and three things drive it: whether this is your first or a subsequent use of your VA benefit, the size of your down payment, and whether you are exempt from the fee altogether. The VA sets the rates and publishes the current schedule on its official site, and the exact percentages that apply today are shown below so you can see the math. You should still confirm the rate for your own scenario when you lock your loan, because the schedule can change.
If you are weighing this against the other main loan types before you focus on the fee itself, it helps to see the whole comparison on one page. See the full FHA vs conventional vs VA comparison.
VA Funding Fee Rates (Current Schedule)
The rate depends on whether this is your first or a subsequent use of your VA loan benefit, the size of your down payment, and your exemption status. National Guard and Reserve members pay the same schedule as regular military, so there is no separate Reserve or Guard rate. Here is the current schedule for VA purchase and construction loans:
| Use of Your Benefit | Down Payment | Funding Fee Rate |
|---|---|---|
| First-time use | Zero down | 2.15% |
| First-time use | 5% to 9.99% down | 1.50% |
| First-time use | 10% or more down | 1.25% |
| Subsequent use | Zero down | 3.30% |
| Subsequent use | 5% to 9.99% down | 1.50% |
| Subsequent use | 10% or more down | 1.25% |
The rate is higher for a subsequent use because the VA considers a second use a higher risk while you still have an active VA loan. Putting money down drops the rate significantly, even on a first use. The schedule above is published by the VA and is the same for Veterans, active-duty service members, and National Guard and Reserve members.
Source: VA funding fee and loan closing costs (va.gov) Source: VA home loans (va.gov)
Who Is Exempt From the Funding Fee
This is the part that saves veterans real money, so listen closely. The entire funding fee is waived for certain groups. If any of these apply to you, you pay zero funding fee:
- Veterans receiving VA disability compensation
- Surviving spouses receiving Dependency and Indemnity Compensation (DIC)
- Active-duty members with a proposed or memorandum disability rating
- Purple Heart recipients on active duty
- Service members who would receive disability compensation but receive retirement pay instead
If you think you might qualify for any of these exemptions, your lender verifies your status using your Certificate of Eligibility (COE). Do not assume you are not exempt; a qualifying disability rating, even at 10%, waives the full fee under current VA rules, and many veterans only discover the waiver when their lender checks the COE.
Source: VA funding fee and loan closing costs (va.gov)
Can You Get a Refund of the Funding Fee?
The fee may be refunded in two situations worth knowing about before you pay it:
- Later disability award with a retroactive date. If you paid the funding fee and are later awarded service-connected disability compensation with a retroactive effective date, the fee may be refunded. When the retroactive effective date covers your loan closing date, you were exempt at closing even though the claim was still pending, and the fee you paid may be refunded.
- A loan that never closed. If the loan did not go through and you paid the funding fee, the fee may be refunded as part of the loan not being completed.
I am deliberately not quoting refund percentages, dollar amounts, or timelines here, because the refund process is handled by the VA and the details depend on your situation. Confirm the current VA refund process with your lender and on the official VA site before you count on any specific outcome.
Source: VA funding fee and loan closing costs (va.gov)
The Funding Fee in Real Numbers
The funding fee is typically rolled into your loan balance so you do not have to write one large check on closing day. Here is what that looks like in real numbers:
Example: $400,000 VA loan with zero down, first-time use
- Base loan amount$400,000
- Funding fee (2.15%)$8,600
- New loan balance$408,600
- Approximate monthly impactabout $50/month over 30 years
Compare that to FHA. On the same $400,000 purchase, FHA requires an upfront mortgage insurance premium of 1.75% ($7,000) plus an annual mortgage insurance premium of 0.55% that stays for the life of the loan on most FHA loans with less than 10% down. That annual premium alone is about $183/month, on top of the upfront premium. VA wins comprehensively.
VA vs FHA vs Conventional: Total Cost Comparison
Here is how the total cost of mortgage insurance and fees stacks up over time across the three loan types, on a $400,000 home with minimum down:
| Cost Type | VA | FHA | Conventional |
|---|---|---|---|
| Upfront fee | $8,600 (funding fee) | $7,000 (UFMIP) | $0 |
| Monthly MI | $0 | ~$183/month | ~$150/month |
| 5-year total cost | $8,600 | $17,980 | $9,000 |
| 10-year total cost | $8,600 | $28,960 | $11,400* |
* Conventional PMI assumed to drop off at year 6 when LTV reaches 80%. Actual results may vary.
VA wins in almost every scenario for eligible borrowers. The one-time funding fee is smaller than what you would pay in ongoing mortgage insurance on an FHA or conventional loan, especially over the long term. If you are exempt, the funding fee is zero and the comparison only gets stronger.
Funding Fee vs No Monthly MI
One of the reasons the VA loan is so strong is that there is no recurring monthly mortgage insurance. On many other loans, a small down payment means an extra monthly premium that builds no equity for you. With a VA loan, that monthly cost simply is not there; the one-time funding fee is the trade-off instead, and it is often rolled right into the loan so you never feel it as a separate monthly charge.
If mortgage insurance is new to you, mortgage insurance explained shows how it works and how it differs by loan type. And if you are buying around San Antonio, see how VA loans work for military families in San Antonio so you can plan ahead.
Should You Finance It or Pay It Up Front?
Once you know you owe the fee, the question becomes how to handle it. Both options are common, and the right one depends on your cash situation and how you want your monthly payment to look.
Finance It vs Pay It Up Front
| Option | How It Works | What to Consider |
|---|---|---|
| Finance it into the loan | The fee is added to your balance and paid over the life of the loan | Keeps cash at closing, but adds to what you owe and your monthly payment |
| Pay it up front | You write the check at closing | Costs less over the long run if you can, but raises your cash-to-close |
If you are exempt you pay nothing, which is the cleanest outcome of all. Otherwise weigh protecting your closing cash against the long-term cost of financing a larger balance.
Either way, this fee sits inside your broader settlement costs, so it helps to plan the full picture. See typical buyer closing costs in Texas.
Frequently Asked Questions
Can the VA funding fee be financed?
Yes, in most cases the funding fee can be financed into the loan amount instead of being paid at closing. That means you spread the cost over the life of the loan rather than writing one large check on closing day. It does add to your balance and slightly to your monthly payment, but it protects your cash when you sit down at the closing table. Confirm the current rules for your specific loan before planning around it.
Does the funding fee apply to every VA loan?
Not every borrower pays it. The fee applies to most VA loans, but a qualifying exemption removes it, and some VA-related loans may not carry it at all depending on your situation. Whether you owe it, and at what rate, depends on your use of the benefit, your down payment, and any exemption that applies under current rules. This is exactly why it pays to confirm your own numbers instead of assuming.
How do I prove I'm exempt?
In general, an exemption claim is supported by documentation of your disability rating through the VA. Your lender will guide you through exactly what to submit, and having that paperwork ready early is what turns a fee into a zero. Gather your documents before you get deep into the process so nothing stalls your timeline. Not sure what to pull together? Here is the full list of documents you need for a mortgage.
