VA Loan GuideGuide № 04 · Funding fee
The funding fee, explained.
The one real cost of the VA loan. Here is exactly what it runs in 2026, how a down payment shrinks it, who pays nothing at all, and how refunds work when a disability rating comes through after closing.
TLDR - The Short Version
The VA loan asks for no down payment and no monthly mortgage insurance. The funding fee is the trade, and you pay it once.
First use with less than 5% down runs 2.15%. Use the benefit again and it's 3.30%. Put 5% down and both fall to 1.50%. An IRRRL is 0.50% for everybody.
Almost nobody writes a check for it. It gets financed into the loan, so it isn't cash you bring to closing, and it doesn't come back every month the way PMI does.
Some people pay nothing at all. Not a discount, nothing: anyone drawing VA disability compensation at any rating, anyone eligible for it who takes military retired pay instead, surviving spouses receiving DIC, and active-duty Purple Heart recipients closing before their separation date.
One more worth knowing. If a disability claim was pending when you closed and the VA later granted it back to your closing date, you can get the fee refunded. That one goes unclaimed constantly.
The concept
It's how the program pays for itself.
The VA loan has no down payment requirement and no monthly . The is the trade: a one-time charge, paid at closing or rolled into the loan, that funds the VA’s guarantee program so it doesn’t run on taxpayer money.
Compare it to the alternative before deciding it stings. A conventional borrower putting 3% down pays PMI every month for years, until they reach 20% equity. A first-time VA borrower pays 2.15% once and never sees a mortgage-insurance line on their statement.
What the funding fee costs
In plain words: most buyers pay a one-time fee between 1.25% and 3.30% of the loan, and a service-connected disability rating usually removes it entirely.
Source: VA.gov — VA funding fee and loan closing costs · verified July 10, 2026
The 2026 rates
Three things set your fee: down payment, prior use, and loan type.
| Purchase loans | First use | After first use |
|---|---|---|
| Less than 5% down | 2.15% | 3.30% |
| 5% to 9.99% down | 1.50% | 1.50% |
| 10% or more down | 1.25% | 1.25% |
| Cash-out refinance | 2.15% | 3.30% |
| (streamline refinance) | 0.50% for everyone | |
Source: VA.gov, funding fee and closing costs, checked July 2026.
Two patterns worth noticing. The subsequent-use penalty only exists at less than 5% down; put 5% down and a repeat borrower pays the same 1.50% as a first-timer. And the jump from 2.15% to 3.30%means the “free” second use of the benefit costs real money, which is one reason keeping entitlement questions straight (see the entitlement guide) pays off.
The math
Financed into the loan, it isn't cash you bring to closing.
Almost nobody writes a check for the funding fee. It gets added to the loan amount and paid off over the life of the loan with everything else. On a $300,000 first-use purchase with nothing down:
Home price $300,000
Funding fee × 2.15% = $6,450
Loan amount $306,450
That $6,450 is financed into the loan rather than paid at closing, so it doesn’t come out of your cash at the table, and unlike PMI it does not recur. The buying-power calculator folds the fee into every estimate automatically, using your first-use and exemption answers.
Paying it in cash at closing is allowed, and sellers can pay it for you as part of . Worth negotiating for in a buyer’s market.
Who pays nothing
An exempt borrower pays no fee at all, not a reduced one.
You pay no funding fee at all if any of these is true:
- You receive VA disability compensation for a service-connected condition, at any rating from 10% up.
- You are eligible for compensation but receive military retired pay instead (a common situation for retirees).
- You are a surviving spouse receiving .
- You are an active-duty Purple Heart recipient closing before your separation date.
The exemption shows up on your , and the lender applies it automatically. If you think you qualify and the COE doesn’t show it, stop and fix that before closing. On a $300,000 loan the exemption is worth $6,450 in cash.
The refund rule
Rated after closing? You may be owed the fee back.
This one goes unclaimed constantly. If you had a disability claim pending when you closed and the VA later grants compensation with an effective date on or before your closing date, you are entitled to a refund of the funding fee you paid. On the example above, a $6,450 check.
The refund is not always automatic. If the loan is still active, contact your loan servicer; you can also call the VA at 877-827-3702. Bring your award letter and note the effective date. If the fee was financed, the refund typically pays down your loan balance rather than arriving as cash.
Practical takeaway for anyone buying with a claim in progress: file the claim before you close, keep the paperwork, and set a reminder to check the effective date when the rating comes through.
Common questions
Funding fee questions, answered straight.
- How much is the VA funding fee the second time you use it?
- For a later use with less than 5% down, the fee is 3.30% of the loan, up from 2.15% the first time. Put 5% or more down and it drops to 1.50%, the same as a first-time buyer pays. How entitlement affects this →
- Who is exempt from the VA funding fee?
- You pay nothing if you receive VA disability compensation at any rating, are eligible for it but take military retired pay instead, are a surviving spouse receiving DIC, or are an active-duty Purple Heart recipient. Surviving-spouse details →
- Do you have to pay the funding fee upfront?
- No. It can roll into the loan and be paid over the life of the mortgage, and a seller can cover it as part of concessions. Paying it in cash at closing is allowed but not required.
- Can the VA funding fee be refunded?
- Yes, if you had a disability claim pending when you closed and the VA later grants compensation with an effective date on or before your closing date. Contact your loan servicer or the VA to claim it.
See it in your numbers
The calculator applies your exact fee automatically.
Educational content only. Fee schedule per VA.gov as of July 2026; your COE and lender confirm what applies to your file.
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