VA Funding Fees: A Detailed Guide

VA loans are an excellent advantage for veterans, active military personnel, and eligible surviving spouses, as they enable them to purchase homes with fewer financial hurdles.

A crucial aspect of VA loans is the VA funding fee—a one-time charge that keeps the loan program running so that it can remain available for future borrowers.

The VA funding fee is a small cost that enables the Department of Veterans Affairs to guarantee the program’s long-term sustainability, with advantages including no down payment requirements, low interest rates, and no private mortgage insurance (PMI).

Any borrower wishing to use their VA loan benefits should be aware of how the VA funding fee works.

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In this Article

What Is the VA Funding Fee?

The VA Funding Fee is a one-time payment that most borrowers must pay when obtaining a Veteran Affairs–backed home loan. It helps the Department of Veterans Affairs keep the VA loan program viable for future generations of service members by offsetting costs that come from offering benefits like zero-down financing. The fee itself is calculated as a percentage of your total loan amount and can vary based on:

First vs. subsequent use of the VA loan benefit
The type of loan (purchase, refinance, or IRRRL)
Your down payment percentage
Your military status (active duty, veteran, Reservist, or National Guard)

For instance, on a $300,000 first-time VA loan with no down payment, you may owe a fee of about 2.3% ($6,900). Always consult official VA guidelines or your lender for the most accurate and current calculation.

Why Does the VA Charge a Funding Fee?

The Veteran Affairs funding fee helps the VA offer favorable loan terms—like no monthly mortgage insurance and competitive interest rates—without placing excessive financial pressure on U.S. taxpayers. By collecting this one-time fee, the VA ensures that the program can remain beneficial for future veterans and service members. If the VA didn’t charge this fee, the government might have to limit or discontinue zero-down benefits, potentially making VA loans less accessible or more costly in other ways.

Current VA Funding Fee Rates for 2025

VA home loan funding fee rates can shift depending on legislative changes and VA guidelines. Below are the most recent rates known for 2025. Because these can change, make sure to check the official VA website or confirm with your lender for the latest details.

Purchase and Construction Loans

Down Payment	First-Time Use	Subsequent Use
Less than 5%	2.3%	3.6%
5% or more	1.65%	1.65%
10% or more	1.4%	1.4%

Note: Reservists and National Guard members might pay slightly different rates.

Refinance Loans

Loan Type	Funding Fee
Interest Rate Reduction Refinance Loan (IRRRL)	0.5%
Cash-Out Refinance (First-Time Use)	2.3%
Cash-Out Refinance (Subsequent Use)	3.6%

Important: These percentages may be updated for 2025 or later, so always verify current figures through official VA resources.

How the VA Funding Fee Is Calculated

The funding fee for a VA home loan is based on multiplying the applicable percentage (from the tables above) by your total loan amount. Examples include:

Example 1: $300,000 loan, first-time purchase, no down payment
Fee = 2.3% of $300,000 = $6,900
Example 2: $400,000 loan, subsequent use, 5% down
Fee = 1.65% of $400,000 = $6,600
Example 3: $250,000 IRRRL refinance
Fee = 0.5% of $250,000 = $1,250

Whether it’s your first or second (or more) VA loan can significantly affect the percentage you pay. Your Certificate of Eligibility (COE) typically indicates how many times you’ve used your VA benefit.

Who’s Exempt from the VA Funding Fee?

Not everyone must pay the VA Funding Fee. If you fit into one of the following categories, you may be exempt:

You receive VA compensation for a service-connected disability you are exempt from the funding fee
You’re eligible for VA compensation but receive active-duty or retirement pay instead
You’re an active-duty service member with a documented Purple Heart before closing
You’re a surviving spouse of a veteran who died in service or from a service-connected disability and receive Dependency and Indemnity Compensation (DIC)
You have a pre-discharge claim or memorandum rating establishing eligibility for compensation prior to closing

If you haven’t received confirmation of your status but believe you qualify, you may need to pay the fee first and then apply for a refund. For more details, call the VA Regional Loan Center at 877-827-3702.

Payment Options for the VA Funding Fee

You generally have three ways to pay the VA loan funding fee:

1. Roll It into the Loan

What it means: Instead of paying the VA funding fee out of pocket, you can roll the funding fee into your total loan amount. For example, if you’re buying a $300,000 home and your funding fee is $6,450 (assuming 2.15% for first-time use with 0% down), your loan becomes $306,450.

Pros:

No upfront cash required: Ideal for buyers who want to minimize out-of-pocket expenses at closing.
Preserves savings: You keep more cash on hand for moving costs, renovations, or an emergency fund.

Cons:

Higher loan balance: You’ll be paying interest on the funding fee over the life of the loan, potentially adding thousands to your total repayment.
Slightly higher monthly payment: Even though it’s spread out, it still increases your debt burden.

Best for: Buyers with limited cash reserves or who want to retain liquidity for future needs.

2. Pay It Upfront

What it means: You cover the VA funding fee in full at closing, separate from your loan amount. Using the same $300,000 example, you’d bring $6,450 (or whatever the fee is) in cash to closing in addition to other costs.

Pros:

Avoids interest on the fee: You’re not paying interest on the funding fee for 15 or 30 years, saving money long-term.
Keeps your loan smaller: This can help reduce your monthly mortgage payment slightly.

Cons:

Requires liquidity: You must have enough cash on hand, which can be difficult if you’re already covering closing costs, moving expenses, and deposits.

Best for: Buyers who have enough savings and want to minimize their total long-term mortgage cost.

3. Negotiate with the Seller

What it means: You ask the seller to cover the VA funding fee as part of seller concessions, the seller can pay up to 4% of your total closing costs. These are costs the seller agrees to pay to help close the deal.

Pros:

Out-of-pocket savings: If successful, this eliminates your responsibility to pay the fee altogether.
Helps preserve both loan size and savings: You avoid financing or paying the fee directly.

Cons:

Limited by VA rules: Seller concessions are capped at 4% of the loan amount, and that includes all closing costs — not just the funding fee.
Market conditions matter: In a seller’s market with multiple offers, sellers are less likely to agree to concessions.

Best for: Buyers in slower markets or when purchasing homes that have been on the market a while, where negotiation leverage exists.

Tax Deductibility of the VA Funding Fee

The VA Funding Fee is often tax-deductible, similar to other mortgage-related costs. Whether you choose to finance it or pay it upfront, you may deduct the fee in the year it’s paid or over the life of the loan—depending on your specific tax situation. Because tax laws change and personal financial situations vary, consult with a qualified tax professional to confirm your eligibility and the best way to file.

Strategies to Minimize the VA Funding Fee

1. Put Some Money Down
While VA loans don’t require a down payment, putting down 5% or more can significantly reduce your funding fee.

5% down lowers the fee from 2.15% to 1.5% (first-time use).
10% down drops it further to just 1.25%.
This strategy can save you thousands upfront and reduce the total loan balance — plus, it may signal financial strength to lenders.

2. Verify Potential Exemptions
If you have a VA disability rating (10% or more), you’re exempt from paying the funding fee entirely.

If you’re still waiting on a disability claim decision, you may qualify for a refund after closing.
Always check your Certificate of Eligibility (COE) for exemption status before finalizing your loan.

3. Use an IRRRL When Refinancing
The Interest Rate Reduction Refinance Loan (IRRRL) — also known as the VA streamline refinance — has a reduced funding fee of just 0.5%, regardless of loan size.

Unlike cash-out refinances (which carry the full funding fee), IRRRLs are designed to lower your rate with minimal fees and paperwork.
This makes them ideal for lowering costs when refinancing an existing VA loan.

4. Leverage Seller Concessions
In a buyer’s market or when negotiating on less competitive properties, request that the seller cover all or part of your VA funding fee as part of their closing cost concessions.

VA rules allow seller concessions up to 4% of the loan amount, which can include funding fees, prepaid taxes, and homeowner’s insurance.
This strategy requires a cooperative seller and is more effective when homes have been on the market longer.

Frequently Asked Questions

How can I find my Certificate of Eligibility (COE)?

Apply online through the VA’s portal, ask your lender to request it electronically, or mail a completed VA Form 26-1880 to the VA.

What is the VA funding fee for a refinance?

For an Interest Rate Reduction Refinance Loan (IRRRL), the fee is typically 0.5% of your loan amount. For a cash-out refinance, the fee ranges from 2.3% for first-time use to 3.6% for subsequent uses. Check current rates before finalizing your loan.

What if I’m buying a home in a high-cost area?

The VA funding fee percentages remain the same. However, loan limits in high-cost counties can be higher, allowing you to borrow more without a down payment. Always verify county loan limits with your lender or the VA’s loan limit page.

Can I use a VA loan more than once?

Yes. You can use a VA loan multiple times. However, funding fee rates may increase on subsequent uses unless you meet specific exemption criteria or make a qualified down payment.

Why is the funding fee higher for subsequent uses?

A higher fee on subsequent loans (e.g., 3.6%) helps maintain the program’s financial stability. It offsets additional risk and encourages first-time borrowers while still providing strong benefits for repeat users.

Can the seller pay the VA funding fee?

Yes, sellers can pay up to 4% of the loan amount in closing costs, which can include the VA Funding Fee. This is negotiable and depends on the market.

Is the VA funding fee the same for National Guard and Reservists?

In many cases, National Guard and Reservist rates mirror active-duty rates, but they can be slightly higher. Always confirm the current fee schedule through the official VA website.

How do I get a VA funding fee refund?

If you’re granted retroactive VA disability compensation with an effective date prior to your loan closing, you might qualify for a refund. Contact the VA Regional Loan Center at 877-827-3702 or talk to your lender to initiate the process.

The Bottom Line

The VA Funding Fee is a cornerstone of the VA loan program, ensuring that service members and veterans can access favorable mortgage terms with zero-down financing.

While the fee adds an upfront or financed cost to your home purchase or refinance, it’s often outweighed by the long-term savings of not having monthly mortgage insurance.

By understanding how the fee works in 2025, verifying whether you’re exempt, and exploring options like down payments or IRRRL refinancing, you can tailor your VA home loan to fit your financial goals.

Stay informed by regularly checking official VA resources for the latest rate and policy updates.

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VA Funding Fees: A Detailed Guide

What Is the VA Funding Fee?

Why Does the VA Charge a Funding Fee?