Loans
VA Loan Funding Fee: Rates, Exemptions and an Example
The VA funding fee replaces monthly mortgage insurance. See the rate chart, a $400,000 example at three down payments, who is exempt, and whether to finance it.
By TotalMonthly · Published October 2, 2026 · 3 min read
VA home loans are guaranteed by the Department of Veterans Affairs for eligible service members, veterans and some surviving spouses. They can be had with no down payment and no monthly mortgage insurance. The trade-off is a one-time funding fee, which helps fund the program.
How much the fee is
The fee is a percentage of the loan amount, not the home price, and it depends on your down payment and whether you have used the VA loan benefit before. For purchase loans, using the rate chart the VA lists as effective April 7, 2023:
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% to less than 10% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
The VA’s own example: a first-time user buying a $200,000 home with a $10,000 down payment (5%) pays 1.5% of the $190,000 loan, which is $2,850.
An example on a $400,000 home
For a first-time user on a $400,000 purchase:
| Down payment | Loan amount | Fee rate | Fee |
|---|---|---|---|
| $0 (0%) | $400,000 | 2.15% | $8,600 |
| $20,000 (5%) | $380,000 | 1.50% | $5,700 |
| $40,000 (10%) | $360,000 | 1.25% | $4,500 |
Putting 5% down saves $2,900 in the fee compared with no down payment, and 10% saves $4,100. The VA loan calculator shows how the fee, financed into the loan, changes your monthly payment.
Who does not pay it
You do not pay the funding fee if you receive VA compensation for a service-connected disability, or are eligible to receive it but receive retirement or active-duty pay instead. Surviving spouses receiving Dependency and Indemnity Compensation are also exempt, as are certain service members with a proposed or memorandum rating or a Purple Heart on or before closing. If you are later awarded compensation retroactive to before your closing date, you may be eligible for a refund. Check the VA’s page and your lender for your situation.
Pay it at closing or finance it?
You can pay the fee in cash at closing or include it in the loan. Financing avoids a large upfront cost, but you pay interest on it for as long as you keep the loan. If you have the cash, paying it at closing reduces your balance and total interest. The calculator finances it by default.
No monthly mortgage insurance, but not free of costs
Even without the funding fee’s monthly cost, a VA loan has other costs: the same lender fees, appraisal, title and closing costs as other loans. The VA limits some of the fees a veteran can pay, and the seller can offer certain concessions, up to a limit based on the home’s value.
The bottom line
For eligible borrowers, a VA loan can be one of the least expensive ways to buy, especially with a small down payment, because there is no monthly mortgage insurance. Compare it with conventional and FHA offers using the same price and credit, and look at the total cost over the time you will keep the loan.
Common questions
Can I use my VA loan benefit more than once?
Yes. The benefit is reusable, for example after you sell a home and pay off the loan, and in some cases you can have more than one VA loan with remaining entitlement. Using it again after the first time carries a higher funding fee if you put less than 5% down.
Does the funding fee apply to a refinance?
Yes, with different rates depending on the type of refinance. The streamlined interest rate reduction refinance, for example, has its own fee. Check the VA’s rate chart for the refinance type you are considering.
Is the funding fee included in the APR?
Lenders include the financed fee in the amount borrowed, so it affects your payment and your APR. Read the Loan Estimate to see exactly how your lender presents it.
Key takeaways
- The fee is a percentage of the loan amount and falls as your down payment rises.
- Veterans with a service-connected disability rating are exempt.
- You can finance the fee, but you will pay interest on it.
This guide is for education, not financial or legal advice. Rules, rates and fees change; confirm details with a lender or licensed professional. See our methodology and disclaimer.