VA Loan Funding Fee Explained: Every Rate, Exemption, and Dollar Amount for 2026

The VA funding fee is the main VA-specific cost most non-exempt borrowers pay — a one-time charge to the Department of Veterans Affairs calculated as a percentage of the base loan amount. For a first-use purchase loan with no down payment, the fee is 2.15% — $7,525 on a $350,000 loan; subsequent-use borrowers pay 3.30%, or $11,550 on the same loan; and IRRRL refinances carry a much lower 0.50% fee. Veterans receiving VA disability compensation are commonly exempt from the fee entirely on every use, which is worth confirming on the Certificate of Eligibility before closing.

The VA funding fee is the main VA-specific cost most non-exempt borrowers pay — the tradeoff for no down payment, no PMI, and competitive rates. It's not small: at 2.15% on a $350,000 purchase, it's $7,525. At 3.30% for a subsequent-use borrower, it's $11,550 on that same loan. Understanding the exact rate that applies to your situation — and whether you're exempt — matters before you sign anything.

This post is educational. MilPayTools is not a lender and does not provide mortgage advice. Confirm your funding fee rate and exemption status with a VA-approved lender before closing.

What the funding fee is

The VA funding fee is a one-time charge paid to the Department of Veterans Affairs at closing. It helps fund the VA loan guarantee program — covering losses on loans that go into default — so the program can operate without relying entirely on congressional appropriations.

The fee applies to all VA loan types (purchase, refinance, cash-out) unless the borrower is exempt. The funding fee is calculated as a percentage of the VA base loan amount before the funding fee is added. On a purchase, that usually means the purchase price minus any down payment — not the home value and not the final financed loan amount after the funding fee is rolled in.

2026 VA funding fee rates: purchase loans

Dollar amounts — $350,000 purchase price:

First and subsequent use produce identical fees at 5% and 10% down — the higher subsequent-use rate only applies at less than 5% down.

2026 VA funding fee rates: refinance loans

IRRRL (VA Streamline Refinance): 0.50% — this is the lowest funding fee of any VA loan type, and it applies regardless of first or subsequent use.

Cash-out refinance:

Other VA loan types:

For the full mechanics of VA loan assumptions — including what happens to the seller's entitlement, how buyers qualify, and when an assumption makes financial sense — see VA Loan Assumptions Explained.

Who is exempt from the VA funding fee

These groups pay $0 in funding fee, regardless of loan type, use count, or loan amount:

• Veterans who are entitled to receive VA compensation for a service-connected disability, including some who would receive compensation if they were not receiving retirement or active-duty pay instead — the most common exemption. The exemption is commonly verified through the COE and lender process, but confirm the exemption appears correctly on your Loan Estimate and Closing Disclosure before closing.
• Active-duty service members who have a proposed or memorandum rating for a service-connected disability prior to the loan closing date
• Active-duty Purple Heart recipients — must provide documentation showing the award before closing
• Surviving spouses receiving Dependency and Indemnity Compensation (DIC) for a veteran who died in service or from a service-connected disability

The financial impact is significant. On a $350,000 first-use purchase loan, exemption eliminates $7,525. On a subsequent-use loan at the same amount, exemption eliminates $11,550.

If you have a service-connected disability rating — even 10% — and are considering a VA loan, confirm your exemption status with your lender before closing. A pending claim can affect this.

What happens if your disability claim is pending at closing

Veterans who are later awarded VA disability compensation with an effective date before the loan closing date may be eligible for a funding fee refund.

This applies when:

1. You paid the funding fee at closing (or it was rolled into the loan)
2. Your disability compensation was later approved
3. The effective date of the award predates your loan closing

In this case, contact your lender and VA. The refund process involves VA verifying the effective date and issuing a refund — typically back to you directly if you paid at closing, or applied to your principal if it was financed.

If you have a disability claim in process and a VA loan closing approaching, consider whether delaying the closing until the claim is decided could eliminate the fee entirely rather than trigger a refund process later. See File Your VA Disability Claim Before You Separate for guidance on the timing of disability claims.

Rolling the fee into the loan vs. paying at closing

Most borrowers roll the funding fee into the loan. The VA allows this, and it's common because it eliminates one more line item from cash needed to close.

The tradeoff: Rolling the fee in increases your loan balance and your monthly payment for the life of the loan.

Example — $350,000 purchase, first use, $0 down:

• Funding fee: $7,525 (2.15%)
• Loan amount if financed: $357,525
• At 6.5% for 30 years, the additional $7,525 costs roughly $47/month more in principal and interest
• Over 30 years, you'd pay approximately $16,920 total for that $7,525 fee

There is no penalty for choosing one approach over the other, but financing the fee increases the loan balance and total interest paid over the life of the loan. If you have the cash and plan to stay long-term, paying at closing costs less overall. If cash is tight or the home is a shorter hold, financing the fee is reasonable.

What can be rolled into a VA loan

On a VA purchase loan, the funding fee can usually be financed into the loan. Other closing costs — appraisal, title, escrow, prepaids, recording fees, discount points, inspections, and lender charges — generally need to be paid at closing or covered through seller credits, lender credits, or other negotiated concessions. On IRRRLs, more costs may be includable in the new loan balance, but the tradeoff is a higher balance and more total interest.

How a down payment reduces the fee

The 5% threshold matters most for subsequent-use borrowers.

First-use borrower: Going from 0% to 5% down reduces the fee from 2.15% on $350,000 to 1.50% on $332,500 — from $7,525 to $4,988, saving roughly $2,537 on the fee — but you're also committing $17,500 in cash. For many first-use borrowers, the fee savings alone may not justify using $17,500 of cash for a 5% down payment. The decision depends on reserves, rate, monthly payment, and how long you plan to keep the home.

Subsequent-use borrower: Going from 0% to 5% down reduces the fee from 3.30% on $350,000 to 1.50% on $332,500 — from $11,550 to $4,988, saving roughly $6,562 on the fee. A $17,500 down payment that saves $6,562 in fees and reduces the loan balance by $17,500 is meaningfully different math. The net cost of that down payment drops significantly.

The 10% threshold saves an additional 0.25% over the 5% rate. Going from 5% down to 10% down changes the base from $332,500 to $315,000 — the fee drops from $4,988 to $3,938, a savings of roughly $1,050 — not typically the deciding factor.

The IRRRL: the lowest-fee VA loan

If you already have a VA loan and rates have dropped, the IRRRL (Interest Rate Reduction Refinance Loan) carries a 0.50% funding fee — the lowest available. On a $300,000 remaining balance, that's $1,500.

VA generally does not require a new appraisal or full credit underwriting package for an IRRRL, though individual lenders may have their own documentation requirements or overlays. See the VA Refinance Calculator to estimate monthly savings and break-even point.

Where to verify the funding fee on your loan documents

Look for the VA funding fee on your Loan Estimate (when shopping) and Closing Disclosure (before signing). Confirm three things: the fee rate used, whether the fee is financed or paid in cash, and whether your exemption status is correctly reflected. If anything looks wrong, raise it with your lender before closing.

The bottom line

The funding fee is real money — $7,525 to $11,550 on a mid-range purchase loan — and it's worth understanding exactly what applies to your situation before closing. The two things that can eliminate or reduce it significantly: a qualifying disability exemption (check this first), or a down payment of 5% or more if you're a subsequent-use borrower.

For the full picture on using the VA loan benefit, see the VA Home Loans Guide and the VA Home Loan Calculator.