Key takeaways

  • The VA funding fee is a percentage of your total loan amount that you’ll pay at closing.
  • Congress sets this fee, which is meant to reduce the cost to taxpayers in the event the loan goes into default.
  • The funding fee is lower if it’s your first time getting a VA home loan, and you can pay the fee upfront or roll it into your loan.

For U.S. servicemembers and veterans, the VA loan program is one of the best ways to get the funding needed to buy a house — or to refinance an existing mortgage, including a VA loan. One of the requirements for getting any of these loans — which come with competitive interest rates — is the payment of the VA funding fee.

So, what is a VA funding fee and how much will it cost you? To help you find out, here’s a look at how this fee works.

What is the VA funding fee?

Each VA loan comes with a funding fee — but what is a VA funding fee? Unlike an FHA loan, which requires borrowers to pay an upfront mortgage insurance fee of 1.75 percent of the loan amount, there is no insurance requirement with a VA loan. On top of that, there is no down payment requirement (unlike a conventional loan).

These are generous benefits, but mortgage lenders still need protection in place in the event the borrower doesn’t pay the loan back. That’s where the VA funding fee comes in: to help reduce the cost to taxpayers in the event the loan goes into default.

You’ll pay the VA loan funding fee at closing. It’s based on two key factors: the size of the down payment and whether it’s the first time you’ve used the VA loan program.

How much is the VA funding fee?

Congress calculates VA loan fees based on the costs of running the VA Home Loan program. The latest fee structure took effect on April 7, 2023. With that change, if you put less than 5 percent down, the VA funding fee for first-time use fell from 2.3 percent to 2.15 percent and the subsequent use VA funding fee went from 3.6 percent to 3.3 percent. The fees could change again in the future.

The chart below shows how much you can expect to pay for the VA funding fee if you’re buying a home as a veteran, active-duty military or a member of the Reserve or National Guard. The same VA loan fees apply if you’re taking out a VA construction loan, too.

Down payment First use After first use
Less than 5% 2.15% 3.3%
5% – 9.99% 1.5% 1.5%
10% or more 1.25% 1.25%

It’s important to note that a bigger down payment results in a smaller VA loan funding fee. It might not seem like a big deal, but it can make a difference.

Let’s say you’re buying a $400,000 home as a first-time VA loan borrower. If you put no money down, your funding fee would be $8,600. However, if you have a 10 percent down payment, you’d only be borrowing $360,000 and you’d get the lower rate of 1.25 percent. As a result, you’d have a smaller VA funding fee of only $4,500.

As you can see, although VA loans offer the ability to put no money down, that doesn’t necessarily mean you should take advantage of this perk. If you have the money for a down payment, you could reduce your overall loan costs by shrinking what you pay in VA loan fees.

How to pay the VA funding fee

First, find out if you need to pay the fee at all. Not everyone is required to pay a funding fee when they get a VA purchase loan or a refinance.

If you do need to cover the fee, one of the easiest ways to pay it is to roll it into your loan total. However, if you decide to do that, you’ll pay interest on the fee, which will increase your costs over the life of the loan.

It’s also possible to pay the VA funding fee upfront with cash. If you have the available resources, this can save you money on interest over the loan term.

VA funding fee exemptions

You might be eligible to receive a VA loan funding fee exemption if you can provide paperwork showing that you’re:

  • Disabled and receiving VA compensation for a disability connected to your service
  • Receiving military retirement pay in lieu of compensation for a service-connected disability
  • On active duty and you’ve been awarded the Purple Heart
  • Eligible to receive compensation as the result of a pre-discharge
  • A surviving military spouse whose partner died from a service-related disability, or died in service and you’re receiving Dependency and Indemnity Compensation

VA funding fee refunds

If you already paid for a VA funding fee in the past, you might be able to recoup that cash if you wind up receiving compensation for a disability related to your service. This is a unique situation, so contact a VA loan expert to review your case. You can talk to a VA loan officer by calling 877-827-3702. This line is staffed with professional help Monday through Friday from 8:00 a.m. to 6:00 p.m. Eastern Time.

VA funding fee and refinancing

You can also use the VA loan program to refinance your existing mortgage. One option is a VA Interest Rate Reduction Refinance Loan (IRRRL), otherwise known as a streamline refinance. The funding fee is a nominal 0.5 percent.

Compare the best VA lenders if you’re looking to refinance because some lenders might cover the funding fee for certain loan types. USAA, for example, covers the cost of the funding fee for IRRRLs.

Alternatively, you can do a VA cash-out refinance, but the process to close the loan generally takes longer and the fee is higher.

Refinance loan type VA funding fee: first-time use VA funding fee: subsequent use
Interest Rate Reduction Refinance Loan (IRRRL) 0.5% 0.5%
Cash-out refinance 2.15% 3.3%

There are some exceptions to having to pay a higher funding fee for further use of the program. If you used your previous entitlement for a manufactured home, for example, you may still be able to qualify for the VA funding fee first-time use rate.

VA funding fee FAQ

  • The VA funding fee is the same for cash-out refinances and purchase loans made with less than 5 percent down: 2.15 percent for first-time use and 3.3 percent for each subsequent use. With purchase loans, though, putting more money down scores you a lower rate. If you want to refinance, an IRRRL brings a much smaller VA funding fee of just 0.5 percent.
  • You can ask the seller to cover some or all of the VA funding fee as part of seller concessions. However, the seller is limited to paying no more than 4 percent of the total home loan in concessions, and they are not required to pay your funding fee.
  • As with any home loan, your VA loan comes with closing costs like origination fees, recording fees and the cost of title insurance. These costs vary depending on your lender and what the seller is willing to cover.