VA Funding Fee Explained: Rates, Exemptions, and How to Lower Your Cost

Last updated 10/16/2025 by

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Summary:

The VA funding fee is a one-time cost most VA borrowers pay at closing. It varies by loan type, first vs. subsequent use, and down payment. Many borrowers can roll it into the loan, and certain veterans and surviving spouses are exempt. Use the charts below to estimate your fee and learn simple ways to shrink it.

The VA funding fee helps sustain the VA home loan benefit so eligible borrowers can access $0 down financing with no monthly mortgage insurance. Most borrowers pay it once at closing, either out-of-pocket or by financing it into the loan amount. Some borrowers are exempt based on disability or qualifying status noted on the Certificate of Eligibility (COE).

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Who Pays the VA Funding Fee (and Who’s Exempt)

Typically pays: VA purchase, construction, cash-out refinance, and IRRRL borrowers.
Common exemptions: Veterans receiving compensation for a service-connected disability; veterans who would receive compensation but receive retirement or active-duty pay instead; surviving spouses receiving DIC; service members with a qualifying proposed/memorandum rating before closing; and Purple Heart recipients on or before the closing date.

Refunds: If disability compensation becomes effective retroactively before your closing date, you may qualify for a refund of a fee you paid at closing.

How You Can Pay the Fee

Finance it: Add the fee to your loan amount and repay it over time.
Pay at closing: Bring cash to close (or negotiate seller credits) to cover the fee upfront.

VA Funding Fee Rates (2026)

The fee is a percentage of the loan amount and depends on loan type, first vs. subsequent use of VA benefits, and down payment (for purchases).

Purchase & Construction Loans

Down Payment	First Use	Subsequent Use
Less than 5%	2.15%	3.30%
5% or more	1.50%	1.50%
10% or more	1.25%	1.25%

Explore our construction loan reviews to compare rates, terms, and lenders before starting your next project.

Cash-Out Refinance

Use	Funding Fee
First use	2.15%
After first use	3.30%

Learn how a cash-out refinance lets you tap into your home’s equity to access funds for renovations, debt consolidation, or other major expenses.

IRRRL (VA Streamline), Assumptions & Other

Loan Type	Funding Fee	Notes
IRRRL (Interest Rate Reduction Refinance Loan)	0.50%	Typically no appraisal; fee can be financed
Loan Assumption	0.50%	Paid when a qualified buyer assumes a VA loan
Manufactured home (not permanently affixed)	1.00%	Special property type rules apply
Vendee (VA-acquired property)	2.25%	Separate VA program for VA-owned homes

Want to learn more? Check out the IRRRL meaning to understand how this VA refinance option works.

Good to know: Purchase loan fees decrease at 5% and 10% down payment tiers. If you’re close to one of those thresholds, compare the total cost with and without a slightly larger down payment.

Example Calculations

First-time VA purchase, 0% down: $400,000 loan × 2.15% = $8,600 fee (can be financed).

Repeat-use VA purchase, 5% down: $380,000 loan × 1.50% = $5,700 fee.

IRRRL: $300,000 loan × 0.50% = $1,500 fee.

Ways to Lower or Offset the Funding Fee

Check exemption early: Confirm COE status; a pending disability decision might change your fee if effective before closing.
Increase down payment: Hitting 5% or 10% tiers reduces the fee on purchases.
Use seller credits: Negotiate concessions to cover the fee and other closing costs (subject to VA limits).
Compare scenarios: Ask your lender to model $0 down vs. 5% down to see total savings.

Pros and Cons of the VA Funding Fee

In Conclusion

The funding fee is a one-time tradeoff that keeps monthly costs low for VA borrowers. Verify your exemption status, compare down payment scenarios, and decide whether to finance or pay the fee upfront. Small adjustments—like reaching a 5% down tier—can save thousands over time.

Key Takeaways

The fee varies by loan type, first vs. subsequent use, and down payment.
Exemptions apply for many disabled veterans, certain active-duty members, and eligible surviving spouses.
Purchase fees drop at 5% and 10% down payment tiers.
You can finance the fee or use seller credits to reduce cash to close.

What’s Next

Compare offers from lenders experienced in VA loans and confirm your eligibility and exemption status.

SuperMoney makes it easy to compare multiple VA loan offers side-by-side. Check rates, funding fee exemptions, and closing timelines—without affecting your credit score.
For more on VA loans, check out our in-depth VA loan encyclopedia entry: VA Loan – What It Means & How It Works

FAQs

Who pays the VA funding fee?

Most VA borrowers pay the fee at closing, either out of pocket or by financing it into the loan. Exemptions apply for many disabled veterans, certain active-duty members, and eligible surviving spouses.

How can I avoid the VA funding fee?

Be exempt (per your COE), or—on purchases—lower the fee by making a 5% or 10% down payment. If a disability decision becomes effective before closing, you may qualify for a refund of a fee you paid.

What is the VA 1% rule?

It’s a common shorthand about what lenders may charge as an origination fee on VA loans (up to 1% of the loan amount), separate from the VA funding fee. It doesn’t set your funding fee rate.

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