2025 VA Funding Fees: A Veteran’s 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.
In this Article
What Is the VA Funding Fee?
The VA Funding Fee is a one-time payment for most VA home loans, offsetting costs to sustain the program’s benefits like zero-down financing. It varies by loan type, down payment, and military status.
- Calculated as a percentage of the loan amount.
- Depends on first-time or subsequent use of VA benefits.
- Supports favorable terms without taxpayer burden.
- Learn more at VA Loan Overview.
- Explore details at VA Funding Fee Overview.
Why Does the VA Charge a Funding Fee?
The VA Funding Fee ensures the loan program’s sustainability, funding benefits like no PMI and competitive rates without relying heavily on taxpayers, preserving access for future veterans.
- Maintains zero-down payment options.
- Eliminates need for monthly mortgage insurance.
- Reduces long-term program costs.
- Learn more at VA Loan PMI.
- Details at VA Lenders Handbook.
VA Funding Fee Rates for 2025
VA Funding Fee rates for 2025 vary by loan type and down payment, ranging from 0.5% to 3.6%. Always verify rates with your lender or official VA resources.
- Purchase loans: 1.4%–3.6% based on down payment and use.
- IRRRL refinance: 0.5% regardless of use.
- Cash-out refinance: 2.3% (first use) or 3.6% (subsequent).
- Check updates at VA Funding Fee Rates.
- Details at VA Funding Fee Update.
VA Purchase and Construction Loan Rates
| 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% |
VA Refinance Loan Rates
| 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% |
How the VA Funding Fee Is Calculated
The VA Funding Fee is calculated by multiplying the loan amount by the applicable percentage, determined by loan type, down payment, and prior VA loan use.
- Example: $300,000 first-time purchase, no down payment = 2.3% ($6,900).
- Example: $400,000 subsequent use, 5% down = 1.65% ($6,600).
- Example: $250,000 IRRRL = 0.5% ($1,250).
- Verify with Certificate of Eligibility.
- Details at VA Loan Limits.
Who’s Exempt from the VA Funding Fee?
Certain veterans and service members, such as those with service-connected disabilities or Purple Heart recipients, are exempt from the VA Funding Fee, reducing loan costs.
- Exempt: Veterans with VA disability compensation.
- Exempt: Active-duty Purple Heart recipients.
- Exempt: Surviving spouses receiving DIC.
- Learn more at Disabled Veterans Exemption.
- Details at VA COE Request.
Payment Options for the VA Funding Fee
Borrowers can pay the VA Funding Fee by rolling it into the loan, paying upfront, or negotiating seller concessions, each with distinct benefits and drawbacks.
- Roll into loan: No upfront cost, but increases loan balance.
- Pay upfront: Avoids interest, requires cash at closing.
- Seller concessions: Saves money, limited by 4% cap.
- Learn more at Financing VA Funding Fee.
- Details at VA Lenders Handbook.
Roll It into the Loan
Rolling the VA Funding Fee into the loan eliminates upfront costs but increases the loan balance and monthly payments over time.
- Preserves cash for other expenses.
- Increases interest paid over loan term.
- Ideal for buyers with limited savings.
- Learn more at Financing VA Funding Fee.
Pay It Upfront
Paying the VA Funding Fee at closing avoids interest costs but requires available cash, reducing the overall loan amount.
- Lowers long-term loan costs.
- Requires liquidity at closing.
- Suitable for buyers with ample savings.
- Details at VA Funding Fee Overview.
Negotiate with the Seller
Negotiating seller concessions allows the seller to cover up to 4% of closing costs, including the funding fee, reducing borrower expenses.
- Saves out-of-pocket and loan costs.
- Depends on market conditions and seller willingness.
- Effective in buyer’s markets.
- Learn more at VA Seller Concessions.
Tax Deductibility of the VA Funding Fee
The VA Funding Fee is often tax-deductible as a mortgage-related expense, potentially reducing your tax liability depending on your financial situation.
- Deductible in the year paid or over loan term.
- Consult a tax professional for eligibility.
- Similar to other mortgage insurance deductions.
- Learn more at VA Funding Fee Deduction.
- Details at IRS Publication 936.
Strategies to Minimize the VA Funding Fee
Minimize the VA Funding Fee by making a down payment, verifying exemptions, using IRRRL refinancing, or leveraging seller concessions for cost savings.
- Down payment: Reduces fee from 2.3% to 1.4%–1.65%.
- Exemptions: Disability or Purple Heart status waives fee.
- IRRRL: Lowers fee to 0.5% for refinancing.
- Seller concessions: Covers fee within 4% limit.
- Learn more at VA IRRRL.
- Details at VA IRRRL Program.
Frequently Asked Questions About the VA Funding Fee
What is the VA funding fee?
The VA funding fee is a one-time payment required on most VA loans. It helps offset the cost of the VA loan program and reduces taxpayer burden. The amount depends on loan type, down payment, and service history.
How much is the VA funding fee in 2025?
In 2025, the VA funding fee ranges from 1.25% to 3.3% of the loan amount. First-time use with no down payment typically costs 2.15%, while subsequent use without a down payment is 3.3%.
Can the VA funding fee be waived?
Yes. Veterans receiving VA compensation for a service-connected disability, Purple Heart recipients, or eligible surviving spouses are exempt from the VA funding fee. Exemption must be documented through a valid Certificate of Eligibility (COE).
Can I finance the VA funding fee?
Yes, the VA funding fee can be rolled into the total loan amount. This allows buyers to avoid upfront payment but slightly increases the monthly mortgage payment and total loan balance.
Do I pay the VA funding fee more than once?
You may pay it multiple times if using your VA loan benefit again without exemption. The fee is required on each new loan unless you’re exempt due to disability or other qualifying criteria.
Does a down payment reduce the funding fee?
Yes. Putting 5% or more down reduces the VA funding fee. For example, with a 5% down payment, the fee drops from 2.15% to 1.5% on first-time use VA loans.
Is the VA funding fee tax-deductible?
Yes, in most cases. The VA funding fee is considered a mortgage-related expense and may be deductible as mortgage insurance premiums. Always consult your tax advisor for specific eligibility.
Does refinancing require a VA funding fee?
Yes, both IRRRL (Streamline) and Cash-Out VA refinances carry a funding fee. IRRRLs typically charge 0.5%, while Cash-Out refinances charge between 2.15% and 3.3% unless exempt.
How do I know if I’m exempt from the funding fee?
You’ll see funding fee exemption status listed on your Certificate of Eligibility (COE). If you’re receiving VA disability compensation—or expect to—you may qualify for an exemption at or after closing.
Does the funding fee affect my loan approval?
No. The funding fee doesn’t impact loan approval, credit scores, or debt-to-income ratio directly. But it increases the total loan amount if financed, which slightly affects affordability and monthly payments.
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.
Resources
- VA Funding Fee & Closing Costs Overview – VA.gov
- Funding Fee Rate Update (Circular 26-23-06, Change 2) – VA.gov
- VA Home Loan County Loan Limits – VA.gov
- Interest Rate Reduction Refinance Loan (IRRRL) Program – VA.gov
- VA Lenders Handbook, Chapter 8: Borrower Fees & Charges – VA.gov
- Certificate of Eligibility (COE) Request – VA Form 26-1880
- IRS Publication 936: Home Mortgage Interest Deduction – IRS.gov
