Understanding the VA funding fee

What the fee pays for

The funding fee keeps the VA loan program running without requiring monthly mortgage insurance. That is why a VA loan with zero down can still carry a lower monthly payment than a comparable low-down-payment conventional or FHA loan.

What changes the percentage

Three factors set your fee:

• First use of the benefit versus a subsequent use
• Your down payment, with reduced tiers at 5 percent and 10 percent down
• Loan purpose, since interest rate reduction refinances carry a much lower fee

Exemptions

Veterans receiving VA compensation for a service-connected disability, those entitled to receive it but drawing retirement or active duty pay instead, and surviving spouses receiving Dependency and Indemnity Compensation are generally exempt. Exemption status is confirmed on your Certificate of Eligibility.

If you pay the fee and are later granted a disability rating with an effective date before closing, a refund may be available.

Paying it

The fee can be paid in cash at closing or financed into the loan amount. Financing it preserves cash but increases the balance and the interest paid over time. Our VA funding fee calculator shows both outcomes.