The VA Funding Fee and Who Is Exempt

What the funding fee is

The funding fee is a one-time payment to VA. It helps keep the home loan program going so taxpayers carry less of the cost. It is based on the loan amount, not the price of the home. You can pay it at closing or roll it into the loan.

2026 rates

These are the rates VA publishes today. They took effect April 7, 2023, and still apply in 2026.

Purchase and construction loans

• Less than 5% down: 2.15% the first time you use the benefit, 3.3% after that.
• 5% to less than 10% down: 1.5%, first use or later.
• 10% or more down: 1.25%, first use or later.

These rates are the same for Veterans, active-duty members, and Guard and Reserve members. If your only earlier VA loan was for a manufactured home, you still pay the first-use rate.

Other loans

• Cash-out refinance: 2.15% first use, 3.3% after first use. Down payment does not matter.
• IRRRL (streamline refinance): 0.5%.
• Loan assumption: 0.5%.
• Manufactured home loan not permanently attached to land: 1%.
• Native American Direct Loan: 1.25% for a purchase, 0.5% for a refinance.
• Vendee loan (buying a VA-owned home): 2.25%.

Example

On a $300,000 home with no money down and first-time use, the fee is 2.15% of $300,000, or $6,450. If you put 5% down ($15,000), the loan is $285,000 and the fee drops to 1.5%, or $4,275. That is a savings of $2,175 on the fee alone.

Who is exempt

You do not pay the funding fee if any of these apply:

• You receive VA compensation for a service-connected disability.
• You are eligible for compensation but get retirement or active-duty pay instead.
• You are a surviving spouse receiving DIC.
• You are a service member with a proposed or memorandum rating before closing, based on a pre-discharge claim, that says you are eligible for compensation.
• You are an active-duty member who received the Purple Heart and show proof on or before closing.

If your rating is pending

If you have a disability claim in process, tell your lender early. If VA issues a rating before closing, your COE may update to show the exemption. If the rating comes after closing and VA makes the award retroactive to before your closing date, you may qualify for a refund of the funding fee. A proposed or memorandum rating received after closing does not qualify for a refund.

Step by step: check and save on your fee

1. Look at your COE. It should show whether you are exempt.
2. If it looks wrong, ask your lender to have VA update it before closing.
3. Decide on a down payment. Putting 5% or 10% down lowers the rate.
4. Choose how to pay. Paying in cash saves interest. Financing it keeps cash in your pocket.
5. Ask about seller help. The seller can pay your funding fee, but it counts toward VA's 4% seller concession cap.
6. If you get a retroactive rating after closing, contact VA about a refund.

Should you finance it?

Rolling the fee into the loan is common and convenient. But you will pay interest on it for as long as you have the loan. If you have the cash and plan to stay a long time, paying at closing can save money. If you need your cash for reserves or moving costs, financing it is fine.

Bottom line

The fee is real money, but it often costs less than years of monthly mortgage insurance on other loan types. And if you have a service-connected disability rating, you may not owe it at all.