The Department of Veterans Affairs (VA) funding fee is a one-time payment paid by the Veteran, service member, or survivor on a VA-backed or VA direct home loan. At Rank and Pay, we cover VA benefit rules, and the rates below come from the VA's published fee chart. This charge helps lower the cost of the program for taxpayers because the VA home loan program does not require down payments or monthly mortgage insurance. Anyone using a VA home loan to buy, build, improve, or repair a home, or to refinance, pays the fee unless they meet an exemption.
How Much Is the VA Funding Fee?
On a first-use purchase or construction loan, the VA funding fee is 2.15% with under 5% down, 1.5% with 5% or more down, and 1.25% with 10% or more down. These percentages apply to the total loan amount rather than the sales price of the property.
For buyers using a VA home loan after their first use, the fee rises to 3.3% with under 5% down. It drops to 1.5% with 5% or more down, and 1.25% with 10% or more down. A down payment reduces the loan balance, and 5% and 10% down move you to a lower rate tier. If you used a VA loan in the past only to buy a manufactured home, you still pay the first-use rate on your next home purchase.
The rates in the table below took effect on April 7, 2023. These rates apply to Veterans, active-duty service members, and members of the National Guard and Reserve. The VA sets these figures and can adjust them if the VA changes its rate chart in the future. Check the current schedule on the VA funding fee and closing costs page.
| Down Payment Tier | First-Use Fee Rate | Subsequent-Use Fee Rate |
|---|---|---|
| Under 5% down | 2.15% | 3.3% |
| 5% or more down | 1.5% | 1.5% |
| 10% or more down | 1.25% | 1.25% |
Borrowers who receive VA disability compensation are exempt from paying these fees. You can review how entitlement works in our VA loan entitlement explainer, or review overall loan requirements in our VA home loan guide.
Exemptions From the VA Funding Fee
You are exempt if you receive VA compensation for a service-connected disability. When an exemption applies, you do not pay the fee.
The VA defines five distinct eligibility groups that qualify for an exemption from the VA funding fee:
- Borrowers receiving VA compensation for a service-connected disability.
- Borrowers eligible to receive VA compensation for a service-connected disability but receiving retirement or active-duty pay instead.
- Surviving spouses receiving Dependency and Indemnity Compensation (DIC) as the surviving spouse of a Veteran.
- Service members who received a proposed or memorandum rating before the loan closing date saying they are eligible for compensation because of a pre-discharge claim.
- Active-duty service members who, on or before the loan closing date, provide evidence of a Purple Heart.
For help getting your Certificate of Eligibility, see our COE request guide. A proposed or memorandum rating received after the closing date does not qualify for an exemption or refund and the fee must still be paid. For more on disability ratings and related compensation, explore our guide to 100% VA disability benefits.
Rates for Refinance, Assumptions, and Other Loan Types
Refinance transactions, loan assumptions, and direct home loans carry distinct funding fee percentages that do not follow the purchase down payment schedule.
A cash-out refinance carries a fee of 2.15% for a first use and 3.3% for any subsequent use. Unlike home purchase loans, the cash-out refinance funding fee rate does not change with a down payment level. Other loan categories maintain flat percentages regardless of prior use.
| Loan Category | Funding Fee Rate |
|---|---|
| Interest Rate Reduction Refinance Loan (IRRRL) | 0.5% |
| Loan assumptions | 0.5% |
| Manufactured home loans (not permanently affixed) | 1.0% |
| Vendee loan for VA-acquired property | 2.25% |
| Native American Direct Loan (NADL) purchase | 1.25% |
| Native American Direct Loan (NADL) refinance | 0.5% |
To compare different refinancing structures, read our comparison of a VA IRRRL vs cash-out refinance. If you plan to transfer an existing loan to a new buyer, review the process in our guide to assuming a VA loan.
Calculation of the VA Funding Fee
The VA funding fee is calculated by multiplying the applicable percentage rate by the total loan amount rather than the sales price of the home. Financing the fee increases the total loan balance, which raises your monthly mortgage payment and interest paid over time.
The VA's published worked example for a first-use home purchase:
- Home purchase price: $200,000
- Down payment: $10,000 (5% down)
- Total loan amount: $190,000
- Applicable rate: 1.5% (first use with 5% or more down)
- Total funding fee: $190,000 multiplied by 1.5% equals $2,850
If the buyer in this scenario made no down payment on the same $200,000 home, the total loan amount would be $200,000. At a first-use rate of 2.15% for under 5% down, the fee would equal $4,300. Putting 5% down reduces the loan balance and lowers the percentage rate, reducing the fee by $1,450.
Borrowers decide how to handle this fee at settlement. You can pay the fee in full at closing, or finance it into the loan amount and pay it over time. On a purchase or construction loan, the funding fee is the only cost that can be financed into the loan amount. All other fees and charges must be paid at closing.
Refunds for the VA Funding Fee
A refund of the VA funding fee is possible if you are later awarded VA compensation for a service-connected disability. The strict requirement is that the effective date of your VA compensation must be retroactive to before your loan closing date.
If your award meets this timing rule, a refund is possible. However, a proposed or memorandum rating received after the closing date does not qualify for an exemption or refund and the fee must still be paid. Borrowers who believe they qualify for a refund should call their VA regional loan center.
The VA Funding Fee and Other Closing Costs
The funding fee is separate from standard mortgage closing costs charged by lenders and third parties. The lender sets the interest rate, discount points, and other closing costs on your mortgage. Buyer and seller can negotiate who pays each cost.
All other fees and charges must be paid at closing because the funding fee is the only cost that can be financed into a purchase or construction loan. Sellers and builders may offer credits toward closing costs. The VA limits seller concessions to no more than 4% of the home's reasonable value, which is found on the VA Notice of Value. Concessions include credits for the VA funding fee.
If you are a Veteran without a rating, compare the funding fee with a conventional loan's costs by reviewing our VA loan vs conventional loan guide. See also our VA loan vs FHA loan guide.
Verification and Next Actions
Review the Loan Estimate provided by your lender and confirm the stated percentage against the published schedule on the VA funding fee and closing costs page. Verify that your down payment percentage and prior use status are listed accurately. Check general borrowing terms on the VA home loans portal and review standard limits on the VA loan limits page. To finalize your financing plan, review our VA home loan overview and our entitlement calculation guide to prepare for closing.