VA Loan Funding Fee

The VA funding fee can materially change the cash-to-close number, the loan balance, and how buyers compare offers.

VA describes the funding fee as a one-time payment on a VA-backed or VA direct home loan. It is not monthly mortgage insurance. It can be paid at closing or included in the loan, but buyers should understand what it does to the total loan amount.

What Drives The Funding Fee

• The type of VA loan.
• The total loan amount.
• Whether it is first use or a subsequent use of the VA benefit.
• The down payment amount for purchase and construction loans.
• Whether the borrower has an official exemption.

Why Disability Status Matters

Many veterans do not realize their official VA disability or related status can affect the funding fee. A buyer should verify exemption status before closing, because the difference can be significant. If the exemption is not documented correctly, the fee may show up in the Loan Estimate and closing documents.

Current Official Examples

• VA lists 2.15% for first-use purchase loans with less than 5% down for eligible Veterans, active-duty service members, National Guard, and Reserve members.
• VA lists 3.3% for subsequent-use purchase loans with less than 5% down.
• VA lists 0.5% for IRRRLs.
• VA lists 2.15% first use and 3.3% subsequent use for VA-backed cash-out refinance loans.

These are official VA examples from the current VA funding fee page. Buyers should always confirm the fee on their own Loan Estimate and Closing Disclosure.

Frequently Asked Questions

What is the VA funding fee?

VA describes the funding fee as a one-time payment on a VA-backed or VA direct home loan that helps lower the program cost because VA loans do not require down payments or monthly mortgage insurance.

Can the VA funding fee be financed?

VA says borrowers can include the funding fee in the loan and pay it over time, or pay the full fee at closing.

Who may be exempt from the VA funding fee?

VA lists exemption categories including receiving VA compensation for a service-connected disability, being eligible for compensation while receiving retirement or active-duty pay, certain surviving spouses, certain pre-discharge ratings, and active-duty Purple Heart evidence before closing.

Does the funding fee replace all closing costs?

No. VA says the funding fee is separate from lender interest and other closing costs. On a purchase loan, only the funding fee can be financed into the loan amount.