VA Loan Funding Fee
2026 Rates & Guide
Every rate, every exemption, the refund process — and how it stacks up against conventional PMI.
The VA funding fee is one of the most misunderstood parts of the VA loan process. Many veterans don't realize they may be exempt — or that they're entitled to a refund if their disability rating comes after closing. This guide covers the 2026 rate tables, who qualifies for an exemption, how financing the fee affects your loan, and why the VA loan is still a superior value compared to conventional financing with PMI.
What Is the VA Funding Fee and How Much Is It?
The VA funding fee is a one-time fee paid to the Department of Veterans Affairs on VA-backed home loans — it helps sustain the program for future veterans. As of 2026 (rates effective April 7, 2023), the fee is 2.15% of the loan amount for first-time use with less than 5% down (regular military and veterans), and 3.30% for subsequent use with less than 5% down. With 5–9.99% down the fee drops to 1.50%, and with 10% or more down it falls to 1.25% — for both first and subsequent use. The fee can be financed into the loan or paid at closing. Veterans receiving VA compensation for a service-connected disability may be exempt — confirm your status on your Certificate of Eligibility before closing. Active duty and veteran buyers may also qualify for additional savings through the Serve & Save Program. Rates are set by federal law and verified at va.gov.
VA Funding Fee Rate Tables
Rates are set by federal law. Current rates have been in effect since April 7, 2023 and apply to loans closed in 2026 unless updated by the VA. These rates apply regardless of loan amount — there is no VA loan limit for veterans with full entitlement. See current VA loan limits for Bexar County →
| Down Payment | First Use | Subsequent Use | Example: $400K Loan · First Use |
|---|---|---|---|
| Less than 5% | 2.15% | 3.30% | $8,600 |
| 5% – 9.99% | 1.50% | 1.50% | $6,000 |
| 10% or more | 1.25% | 1.25% | $5,000 |
| Down Payment | First Use | Subsequent Use | Example: $400K Loan · First Use |
|---|---|---|---|
| Less than 5% | 2.30% | 3.30% | $9,200 |
| 5% – 9.99% | 1.50% | 1.50% | $6,000 |
| 10% or more | 1.25% | 1.25% | $5,000 |
| Loan Type | Funding Fee | Notes |
|---|---|---|
| Cash-Out Refinance — First Use | 2.15% | Applies to all loan amounts |
| Cash-Out Refinance — Subsequent | 3.30% | Applies to all loan amounts |
| IRRRL (Streamline Refinance) | 0.50% | Lowest fee of any VA loan type |
| Manufactured Home Loan | 1.00% | Not permanently affixed |
| Loan Assumption | 0.50% | Paid by the borrower assuming the loan |
Rates set by federal law. Confirm current rates at va.gov or with your VA-approved lender at time of application. Exempt borrowers do not pay the funding fee regardless of loan type.
If you have a service-connected disability rating — or a pending rating — check your exemption status before your loan closes. Paying a funding fee you're exempt from is a common and correctable mistake, but it's far easier to address before closing than after. Your COE will reflect your exemption status if it's on file. Check your VA eligibility and COE status →
Who Doesn't Have to Pay the Funding Fee
Exemption eligibility is determined by the VA and reflected on your Certificate of Eligibility. Confirm your status with your lender or at va.gov — do not assume you are or aren't exempt without verifying.
Veterans receiving VA compensation for a service-connected disability may be exempt from the funding fee. This is the most common exemption category. Your disability rating does not need to be at a specific percentage threshold — the exemption applies if you are receiving compensation. Confirm your exemption status is reflected on your COE before closing. Qualifying disabled veterans may also be eligible for Texas property tax exemptions.
Surviving spouses of veterans who died in service or from a service-connected disability may be exempt from the funding fee when using their VA loan benefit. Eligibility rules apply — confirm your specific situation with the VA or your lender. Surviving spouse VA eligibility guide →
Service members or veterans with a proposed or memorandum disability rating on file before the loan closes may qualify for the exemption — even before a final rating is assigned. Timing matters: the proposed rating must be active prior to closing, not after. Coordinate with your lender early if a rating decision is pending.
Active duty service members who have received a Purple Heart award may be exempt from the VA funding fee. Documentation of the award must be provided to the lender prior to closing. Confirm eligibility with your lender and ensure your COE reflects the exemption.
Veterans who are entitled to receive VA compensation but are receiving retirement pay instead may also qualify for the exemption. This is a less commonly known category — if you have a service-connected rating but elected to receive retirement pay, ask your lender to verify your exemption eligibility on your COE before closing.
Financing the Fee vs. Paying at Closing
The VA allows you to roll the funding fee into the loan rather than paying it out of pocket at closing. Here's the tradeoff.
For most military buyers — especially those doing a zero-down VA purchase — financing the funding fee is the standard approach and does not meaningfully change the economics of the loan. The difference in monthly payment is typically $30–$50/month on a $400K loan depending on rate. Paying upfront makes sense if you have the cash and plan to stay in the home long-term. Finance it if preserving cash matters more. The funding fee is just one part of your total costs at closing — see the full closing costs breakdown for San Antonio buyers → Your VA lender can run both scenarios side by side. See the complete VA buying guide for the full purchase process.
How to Get a Funding Fee Refund
If you paid a VA funding fee and later received a disability rating — or had a rating made retroactive — you may be entitled to a refund. This is more common than most veterans realize.
You may be eligible for a refund if: (1) you paid a VA funding fee at closing, and (2) you were later awarded a service-connected disability rating — or an existing rating was made retroactive to a date on or before your closing date. The retroactive scenario is particularly important — if the VA backdates your rating to before your loan closed, you were technically exempt at closing and the fee is refundable. Important: a proposed or memorandum rating received after closing does not by itself create refund eligibility — refunds require VA compensation with an effective date on or before your closing date. Check your COE and eligibility status to verify.
Start with the lender who originated your VA loan. Some lenders proactively process funding fee refunds once they receive notification of a disability rating from the VA. Provide your lender with your VA award letter and closing documents. If your lender does not initiate the process, proceed directly to the VA.
If your lender doesn't process the refund, contact the VA Regional Loan Center directly. Have your loan number, closing disclosure, and VA award letter ready. The VA will verify your eligibility and process the refund. There is no formal deadline to file a refund claim — but acting promptly after your rating is awarded is recommended.
If the funding fee was paid out of pocket at closing, the refund is typically issued as a direct payment. If the fee was financed into the loan, the refund is generally applied as a principal reduction — reducing your outstanding loan balance. The refund amount is the full fee paid, not a partial credit. On a $400K first-use purchase (2.15%), that's an $8,600 refund.
Funding Fee vs. PMI — The Real Math
The funding fee gets attention because it's a visible upfront cost. PMI is less visible because it's spread monthly — but it costs far more over time.
| Factor | VA Loan (No Down · First Use) | Conventional (3–5% Down) |
|---|---|---|
| Upfront Cost | 2.15% funding fee (financeable) | 0 — but PMI starts immediately |
| Monthly Insurance Cost | $0 — no monthly PMI ever | $150–$500+/month (0.5–1.5% annual) |
| When It Ends | Never — one-time only | When you reach 20% equity (years) |
| On a $400K Loan | $8,600 one-time (financeable) | $2,000–$6,000/year until 20% equity |
| 5-Year Cost Estimate | $8,600 total (financed — no cash out) | $10,000–$30,000 in PMI premiums |
| Can Be Eliminated | N/A — already a one-time fee | Only after reaching 20% equity |
| Exempt Option | Yes — disability-rated veterans pay $0 | No exemptions available |
Even paying the full 2.15% funding fee on a $400K purchase, most VA buyers break even against conventional PMI within 12–18 months — and come out significantly ahead over a typical 5–7 year ownership horizon. For exempt veterans, the VA loan is unambiguously superior: zero down, zero PMI, zero funding fee, and competitive rates. No conventional loan product matches that combination. See the full VA vs. conventional closing costs comparison →
VA Funding Fee FAQ
The questions veterans and active-duty buyers ask most.
Is the VA funding fee tax deductible?
Does the VA funding fee apply to refinances?
What counts as "subsequent use" of the VA loan?
Can seller concessions cover the VA funding fee?
What if my disability rating is pending when I close?
How is the VA funding fee different from closing costs?
Related VA & Military Guides
Questions About Your VA Loan Funding Fee?
Whether you're checking your exemption status, calculating what you'll owe, or deciding whether to finance or pay upfront — Christopher Beal is a VA-experienced Army veteran who can walk you through your specific situation. The call is free. The expertise is real.