VA Funding Fee
The VA Funding Fee is a governmental fee applied to every VA purchase and refinance loan. This fee goes directly to the Department of Veterans Affairs to help cover losses and keep the loan guaranty program running for future generations of military homebuyers.
The fee changes depending on several factors, including the nature of the borrower’s service, whether the borrower has used the benefit before, the type of loan and whether there’s a down payment. Regular military members pay slightly lower funding fees than Reservists and National Guard members.
Borrowers with service-connected disabilities and select others might not have to pay it at all.
This fee is due at your loan closing. Lenders will collect and send the funding fee payment to the VA through an automated system. Mortgage lenders have no control over a borrower’s eligibility for the funding fee or what they’re required to pay.
VA Funding Fee for Purchase Loans
Active duty and veteran buyers with Regular Military service will pay a little less than Reserve and National Guard buyers when they’re using this benefit for the first time.
Contributing a down payment decreases the funding fee for both first-time and repeat VA borrowers
Funding Fee Table for VA Purchase Loans for Regular Military veterans
ServiceDown Payment1st UseAfter 1st Use
Active DutyNone2.15%3.3%
-5% or more1.5%1.5%
-10% or more1.25%1.25%
Reserves/GuardNone2.4%3.3%
-5% or more1.75%1.75%
-10% or more1.5%1.5%
VA Funding Fee for Refinance Loans
The VA has two refinance products: The Interest Rate Reduction Refinance Loan (IRRRL) and the Cash-Out refinance. The funding fees differ significantly between them, in part because of their objectives.
The IRRRL exists to get current VA homeowners into a lower-rate mortgage or out of an adjustable-rate loan. The Cash-Out refinance allows qualified veterans to refinance and extract cash from equity.
Unless they’re exempt, all VA homeowners pay the same 0.5 percent funding fee on an Interest Rate Reduction Refinance Loan, regardless of their service history or how many times they've used the VA loan program.
The funding fee breakdown for a Cash-Out refinance is similar to a VA purchase loan. Borrowers cannot lower their funding fee by making a down payment or using equity.
Mortgage lenders will verify your funding fee status during the loan process. The Certificate of Eligibility will usually indicate whether or not the borrower must pay the VA Funding Fee.
VA buyers can ask the seller to pay this fee on their behalf, pay it in cash or finance it into their loan. Veterans getting a VA refinance can pay the fee out of pocket or finance it over the life of the loan.
Most VA borrowers who are required to pay it choose to finance the VA Funding Fee, which on a VA purchase is the only closing cost you can roll into the loan.
VA Funding Fee Exemptions
Those who do not have to pay the VA Funding Fee include Veterans who:
receive compensation for service-connected disabilities
would receive disability compensation if they didn’t receive retirement pay
are rated as eligible to receive compensation on the basis of a pre-discharge exam or review
can but are not receiving compensation because they’re on active duty
Borrowers who have a disability claim pending at the time of closing are required to pay the funding fee. If the veteran is awarded disability compensation after the loan closes, it may be possible to obtain a refund of the VA Funding Fee.
Uncommon Funding Fee Scenarios
When two veterans with VA loan entitlement get a loan together, the funding fee is still in play. But it can wind up working a bit differently in these relatively uncommon cases. A major consideration is who’s contributing VA loan entitlement.
If two veterans are each contributing entitlement but one of them is exempt from paying the funding fee, the funding fee on their loan is cut in half. If this same set of veterans is seeking a VA loan but the veteran who’s exempt is not contributing entitlement, then their loan would carry the full funding fee.
In the rare instance where two veterans are each contributing entitlement and using the benefit for the first time, but one is a Regular Military veteran and the other is a National Guard or Reserve veteran, the funding fee would be 2.275 percent. That’s the average of their respective first-time funding fee charges (2.15 percent and 2.4 percent).
Last, VA loan assumptions come with a 0.5 percent funding fee.
