What is the VA funding fee?
The VA funding fee is a one-time fee paid to VA on a VA-backed loan. It's figured on the loan amount, not the price of the home. You can pay it in cash at closing or add it to the loan. VA loans don't require monthly mortgage insurance; the funding fee is a one-time cost in its place.
Because it's figured on the loan amount, a larger down payment lowers it twice: a smaller loan, and on a purchase, a lower rate.
Added to the loan, you pay it over time. VA notes (opens in a new tab) that on a purchase loan, the funding fee is the only fee or charge you can add to the loan amount — other closing costs are paid at closing, by you or as credits from the seller.
Your Loan Estimate (opens in a new tab) shows it on its own line so you can compare.
How much is the VA funding fee on a purchase?
On a purchase, the fee is 2.15% for a first VA loan with less than 5% down, and 3.3% after your first VA loan. With 5% or more down it is 1.5%, and with 10% or more down it is 1.25%, whether it's your first VA loan or a later one. It's a percent of the loan amount.
| Your down payment | First VA loan | After your first VA loan |
|---|---|---|
| Less than 5% | 2.15% | 3.3% |
| 5% or more | 1.5% | 1.5% |
| 10% or more | 1.25% | 1.25% |
So the subsequent-use rate only costs more when you put less than 5% down. If your only earlier VA loan was for a manufactured home, VA still charges you the first-use rate.
What about refinancing and other VA loans?
The rate depends on the loan type. A cash-out refinance is 2.15% for a first VA loan and 3.3% after. An interest rate reduction refinance (IRRRL) and assuming an existing VA loan are each 0.5%. A manufactured home not on a permanent foundation is 1%. A Native American Direct Loan is 1.25% for a purchase and 0.5% for a refinance.
| Loan type | Funding fee |
|---|---|
| Cash-out refinance, first VA loan | 2.15% |
| Cash-out refinance, after your first VA loan | 3.3% |
| Interest rate reduction refinance (IRRRL) | 0.5% |
| Assuming an existing VA loan | 0.5% |
| Manufactured home not on a permanent foundation | 1% |
| Native American Direct Loan, purchase | 1.25% |
| Native American Direct Loan, refinance | 0.5% |
For these loans the down payment and earlier use don't change the rate, except the cash-out split shown. More on the IRRRL: refinancing.
Who doesn't have to pay the VA funding fee?
You don't pay it if you receive VA compensation for a service-connected disability, or are eligible for it but receive retirement or active-duty pay instead. Surviving spouses receiving Dependency and Indemnity Compensation are exempt, as are some service members with a pre-discharge disability rating or a Purple Heart.
VA lists five situations. You're exempt if any one is true:
- You receive VA compensation for a service-connected disability.
- You're eligible for that compensation but receive retirement or active-duty pay instead.
- You're a surviving spouse receiving Dependency and Indemnity Compensation (DIC).
- You're a service member with a proposed or memorandum rating, issued before closing, saying you're eligible for compensation from a pre-discharge claim.
- You're on active duty and, on or before closing, show proof that you received the Purple Heart.
Your lender checks your exemption status with VA when it requests your Certificate of Eligibility. If you think you're exempt and your Loan Estimate still shows the fee, raise it before closing.
Can you get the funding fee refunded?
Sometimes. If you paid the fee and VA later awards you compensation for a service-connected disability, with an effective date before your loan closed, you may be due a refund. A proposed or memorandum rating you receive after closing doesn't qualify. To ask, contact your VA regional loan center.
This matters most if you're about to separate and have a disability claim in progress. Ask about the timing of your claim and your closing before you set a date. VA's funding fee page (opens in a new tab) has the regional loan center contact details.
Can the seller pay the VA funding fee?
Yes, as part of seller concessions. VA lets a seller or builder give you credits toward closing costs and doesn't cap those. It separately limits seller concessions, such as paying your funding fee, to 4% of the home's reasonable value, shown on the VA Notice of Value your lender gives you.
Seller concessions are extras like paying your funding fee, paying off a debt of yours, or prepaying your homeowners insurance. The limit is set against the home's reasonable value on the VA Notice of Value.
More on this: VA home loans
