The VA funding fee is a one-time charge paid to the Department of Veterans Affairs on most VA loans to help keep the program running without a down payment or monthly mortgage insurance. The amount depends on whether it's your first use, whether you make a down payment, and the type of loan. Veterans receiving VA disability compensation, and certain others, are exempt. See VA's current table for amounts.
What the VA funding fee is
The funding fee is a one-time charge paid to VA at closing on a VA-guaranteed loan. It's not a lender fee and it's not mortgage insurance. It's calculated as a portion of the loan amount, and it shows up on your Loan Estimate and Closing Disclosure.
Because it's a finance charge, this site doesn't quote amounts. The official schedule is on VA's current funding fee table, and Matthew will show you the exact figure for your loan in writing.
Why it exists
VA loans don't require a down payment or charge monthly mortgage insurance. The funding fee helps offset the cost of the guaranty to taxpayers and keeps the program self-sustaining. In practical terms, it's the trade-off for 100% financing without PMI — a one-time cost instead of an ongoing monthly one.
That's also why the fee is structured to reward certain choices: making a down payment generally lowers it, and it's typically higher when you've used the benefit before.
Want a straight answer for your situation? Skip the call center — Matthew will review your eligibility, entitlement, and options himself.
Talk with MatthewHow the funding fee varies
VA sets the fee based on a few factors. Here's the pattern, without the percentages:
| Factor | How it generally affects the fee |
|---|---|
| First use vs. subsequent use | Generally higher for subsequent use when there's no down payment |
| Down payment (purchase loans) | A larger down payment generally lowers the fee, in tiers |
| Purchase or cash-out refinance | Uses the main purchase/cash-out schedule |
| IRRRL (streamline refinance) | Generally a lower, flat fee regardless of prior use |
| Loan assumption | A separate, lower fee applies |
| Native American Direct Loan / manufactured home (not permanently affixed) | Separate schedules apply |
VA occasionally changes the fee schedule. Always check VA's current funding fee table. VA rules change — Matthew will confirm the current guidelines for your file.
Who's exempt from the funding fee
You generally don't pay the VA funding fee if any of these apply:
- You receive VA compensation for a service-connected disability.
- You're eligible to receive disability 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 before closing saying you're eligible for compensation due to a pre-discharge claim.
- You're a service member on active duty who has received the Purple Heart (with proof provided on or before closing).
Your exemption status shows on your Certificate of Eligibility. If it's wrong, fix it before closing — it's much harder to fix after.
Refunds if you're rated later
Sometimes a Veteran pays the funding fee and then receives a disability rating afterward. In that case, VA may refund the fee if the rating is effective before your closing date — for example, when a claim was pending at closing and the award is later made retroactive to a date before closing.
- Refunds are generally issued by VA, not the lender.
- If you think you qualify, contact your VA regional loan center with your award letter and closing documents.
- If you have a claim pending when you're buying, tell Matthew. It may affect timing decisions and what to document.
A rating that's effective after closing generally doesn't make you eligible for a refund. The effective date is what matters.
Paying or financing the fee
You have options:
- Finance it. The fee can generally be added to the loan amount, so you don't pay it out of pocket. This is the most common choice. Financing it increases your loan balance.
- Pay it at closing. You can pay it in cash as part of closing costs.
- Seller-paid. A seller can pay the funding fee as part of the concessions VA allows, subject to VA's limits.
Financing the fee is allowed even on a no-down-payment purchase, which is why the loan amount can end up above the purchase price. Matthew will show both versions side by side on your Loan Estimate so you can decide.
Avoiding funding fee surprises
Most funding fee problems come from records that don't match reality. A few habits help:
- Check your COE early. If you receive disability compensation, the COE should say you're exempt. If it doesn't, Matthew can ask VA to review it before closing.
- Mention pending claims. A pre-discharge claim or a claim in progress can change your status. Bring any proposed or memorandum rating you've received.
- Purple Heart recipients on active duty: provide proof on or before the closing date so the exemption can be applied.
- Know whether VA sees this as first or subsequent use. A prior VA loan — even a long-ago refinance — can change which part of the schedule applies. See VA entitlement.
- Compare financed vs. paid. Ask for your Loan Estimate both ways so you can see how financing the fee changes the loan amount.
Surviving spouses receiving DIC should make sure that status appears on their COE, too — see the surviving spouse guide.
Frequently asked questions
Is the VA funding fee the same as PMI?
No. PMI is an ongoing monthly charge on some conventional loans. The VA funding fee is a one-time charge, and VA loans have no monthly mortgage insurance.
Do I pay the funding fee if my disability rating is low?
Veterans receiving VA compensation for a service-connected disability are generally exempt, regardless of rating level. Your COE should reflect it.
Can the seller pay my funding fee?
Generally yes, as part of the concessions VA allows, subject to VA's limits.
Is the funding fee higher the second time?
For purchases and cash-out refinances with no down payment, the fee is generally higher for subsequent use. See VA's current funding fee table.
Is the funding fee refundable?
VA may refund it if you're later awarded compensation with an effective date before closing. Contact your VA regional loan center.
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