VA Funding Fee
The VA funding fee is a one-time charge on most VA loans. On a purchase it ranges from 1.25% to 3.30% of the loan, depending on your down payment and whether it is your first use of the benefit. It is 0.50% on an IRRRL or assumption. Veterans with qualifying disability compensation are exempt.
Key Takeaways
- Purchase fee: 2.15% first use or 3.30% subsequent use with less than 5% down; 1.50% with 5% to under 10% down; 1.25% with 10% or more down.
- Cash-out refinance: 2.15% first use, 3.30% subsequent use. IRRRL (streamline): 0.50%. Assumption: 0.50%.
- Veterans receiving VA disability compensation, and certain surviving spouses and others, are exempt.
- You can pay the fee in cash or finance it into the loan. A financed fee is added to the loan balance.
- If your disability rating is approved after closing and the VA makes it effective before your closing date, you may be due a refund.
What is the VA funding fee?
The funding fee is a percentage of the loan amount paid to the VA. It helps fund the loan guaranty program so that it can run without monthly mortgage insurance and with a low or no down payment. It is not a lender fee, and it is separate from your closing costs.
How much is the VA funding fee on a purchase?
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% to less than 10% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
The same rates apply to Reserve and National Guard borrowers. The fee is a percentage of the base loan amount, which is the purchase price minus your down payment.
How much is the fee on other VA loans?
| Loan type | First use | Subsequent use |
|---|---|---|
| Cash-out refinance | 2.15% | 3.30% |
| IRRRL (streamline refinance) | 0.50% | 0.50% |
| Loan assumption | 0.50% | 0.50% |
See VA cash-out refinance guidelines, the streamline funding fee and VA loan assumption for the details of each.
Who is exempt from the funding fee?
- Veterans receiving VA compensation for a service-connected disability.
- Veterans who would receive that compensation but are receiving military retirement pay instead.
- Surviving spouses of veterans who died in service or from a service-connected disability, and who receive Dependency and Indemnity Compensation (DIC).
- Service members with a pre-discharge disability rating who are on active duty awaiting discharge.
- Active-duty members who are entitled to compensation but not yet receiving it.
- Purple Heart recipients serving on active duty at the time of closing.
The exemption applies to purchase, cash-out and IRRRL loans. Your Certificate of Eligibility shows whether you are exempt, so ask your loan officer to check it before you see a Loan Estimate.
Can I finance the funding fee?
Yes. Most borrowers add it to the loan instead of paying cash. That keeps cash in your pocket at closing, but it raises the loan balance, so you pay interest on the fee over time. The fee is calculated on the base loan, then added.
- 0% down: base loan $700,000 x 2.15% = $15,050. Financed, the total loan is $715,050.
- 5% down ($35,000): base loan $665,000 x 1.50% = $9,975. Financed, the total loan is $674,975.
- 10% down ($70,000): base loan $630,000 x 1.25% = $7,875. Financed, the total loan is $637,875.
Moving from 0% to 10% down cuts the fee by $7,175 ($15,050 minus $7,875). A subsequent-use buyer with 0% down on the same home pays 3.30%, or $23,100, which is $8,050 more than a first-time buyer. An exempt buyer pays $0.
Is there a way to avoid or reduce the fee?
- Check your exemption. If you receive disability compensation, or have a pending claim, tell your loan officer. A pending claim can matter, as noted below.
- Put more down. At 5% the first-use rate falls from 2.15% to 1.50%, and at 10% to 1.25%. Compare the cash you would tie up against the fee saved.
- Ask for seller help. The seller may be able to pay the funding fee as part of allowable concessions, within the 4% cap on non-standard concessions. Ask your agent and loan officer how it counts.
- Consider the loan type. An IRRRL carries a much lower fee than a cash-out refinance.
How do I get the fee refunded?
If you paid the funding fee and the VA later decides you were entitled to disability compensation from a date on or before your closing, the VA can refund the fee. This commonly happens when a claim was pending at closing. The refund goes through the VA, and the lender or servicer usually does not handle it on its own. Keep your closing documents and your VA award letter, and ask your loan officer how to start the request. A refund is not guaranteed, because it depends on the effective date the VA assigns.
Does the fee change with California prices?
The percentage does not change, but the dollar amount does. Because California loan balances are high, the difference between a 2.15% and a 1.25% fee is larger than in lower-priced markets. On an $850,000 purchase at 0% down, the fee is $18,275. With 10% down ($85,000), the base loan is $765,000, and the fee is $9,562.50, which is $8,712.50 less. Look up limits for your county with our loan limit lookup.
For a broader look, read what the VA funding fee is and VA loans.
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Frequently Asked Questions
Is the VA funding fee the same as mortgage insurance?
No. It is a one-time fee paid to the VA. VA loans have no monthly mortgage insurance.
Does the fee change if I use my benefit again?
Yes, but only when you put less than 5% down. At 5% or more down, the rate is the same for first and subsequent use.
Can I finance the funding fee?
Yes. Most borrowers add it to the loan amount.
Do I pay the fee on an IRRRL?
Yes, at 0.50%, unless you are exempt. It can be financed into the new loan.
I am waiting on a VA disability decision. What should I do?
Tell your loan officer before closing. If your rating is approved with an effective date before closing, you may be entitled to a refund of the fee.
Rates and terms depend on your situation; approval requires qualification.
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