The VA Funding Fee is a one-time administrative charge paid to the Department of Veterans Affairs. While it is an extra cost, it is the “engine” that allows you to buy a home with $0 down and no monthly mortgage insurance.
I. What is the VA Funding Fee?
The VA Funding Fee is a one-time administrative charge paid directly to the Department of Veterans Affairs (VA). It is a vital component of the VA-backed home financing, designed to offset the costs to U.S. taxpayers and ensure the program’s long-term sustainability.
Crucially, the funding fee is what allows the VA to guarantee the loan to the lender, enabling eligible borrowers to obtain financing with:
- No required down payment (even on VA Jumbo Loans).
- No requirement for Private Mortgage Insurance (PMI), saving you hundreds of dollars per month compared to conventional loans.
The fee is a percentage of the total loan amount and is assessed every time an eligible borrower uses their VA home loan benefit.
II. The VA Funding Fee Schedule (2025-2026)
The specific funding fee percentage you pay depends on three primary factors: the purpose of the loan, your usage history (first-time vs. subsequent use), and your down payment.
VA Purchase and Construction Loans
Rates for buying or building a home. Making a down payment—even a small one—can significantly reduce the fee.
| Down Payment Amount | First-Time Use | Subsequent Use |
|---|---|---|
| Less than 5% ($0 Down) | 2.15% | 3.30% |
| 5% to 9.99% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
Refinance and Assumption Rates
Refinance rates vary depending on whether you are taking cash out of your equity or simply lowering your interest rate.
| Loan Type | First-Time Use | Subsequent Use |
|---|---|---|
| VA Cash-Out Refinance | 2.15% | 3.30% |
| VA IRRRL (Streamline) | 0.50% | 0.50% |
| VA Loan Assumptions | 0.50% | 0.50% |
III. VA Funding Fee Exemptions (The Waiver)
Certain eligible veterans, service members, and surviving spouses are completely exempt from paying the VA Funding Fee (a 0.00% rate). This exemption must be established before closing and is typically noted on your VA Certificate of Eligibility (COE).
You are typically exempt if:
- You receive VA compensation for a service-connected disability.
- You are an active-duty service member who has been awarded the Purple Heart.
- You are an eligible Surviving Spouse receiving Dependency and Indemnity Compensation (DIC).
IV. Payment and Financing Options
You have three primary ways to handle this fee at the closing table:
- Financing the Fee: The most common approach. The fee is rolled into the total loan amount, meaning you pay $0 upfront.
- Paying Upfront: You pay the fee in cash at closing. This avoids paying interest on the fee over the life of the loan.
- Seller Concessions: The seller can pay the fee for you. Note that this counts toward the 4% seller concession limit.
V. VA Funding Fee Refunds
If you paid the funding fee at closing but were later awarded disability compensation with a retroactive effective date (backdated to before your loan closed), you may be eligible for a refund. If you believe you qualify, contact our specialists or the VA Regional Loan Center to initiate the request.