VA loans: benefits and the VA funding fee
VA-backed loans for eligible veterans and service members: no down payment requirement, no monthly mortgage insurance, and a one-time funding fee unless you are exempt.
Sourced from official pages · Updated September 30, 2026💡 Key takeaways
- VA loans need no down payment for eligible borrowers and have no monthly mortgage insurance.
- A one-time VA funding fee applies unless you are exempt; it is lower with a larger down payment.
- Eligible borrowers include veterans, service members and surviving spouses.
- The funding fee can be rolled into the loan.
VA funding fee (purchase and construction loans)
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.3% |
| 5% or more | 1.5% | 1.5% |
| 10% or more | 1.25% | 1.25% |
These rates are in effect from April 7, 2023, as published by the VA.
Other VA loans
| Loan type | Funding fee |
|---|---|
| Cash-out refinance, first use | 2.15% |
| Cash-out refinance, subsequent use | 3.3% |
| Interest rate reduction refinance (IRRRL) | 0.5% |
| Native American Direct Loan — purchase | 1.25% |
| Native American Direct Loan — refinance | 0.5% |
Who is exempt from the fee
- You receive VA compensation for a service-connected disability.
- You are eligible for VA compensation but receive retirement or active-duty pay instead.
- You are a surviving spouse receiving Dependency and Indemnity Compensation (DIC).
- Certain service members with a proposed or memorandum disability rating before closing, and active-duty members who provide Purple Heart evidence by closing.
If you receive a proposed or memorandum rating after your loan closes, you still need to pay the funding fee.
The funding fee can be financed
Many borrowers roll the funding fee into the loan amount. To see how that changes the payment, add it to the loan amount in the mortgage calculator. VA loans have no monthly mortgage insurance, so leave the PMI field at 0.
Why the funding fee depends on your down payment and use
The fee steps down as your down payment rises (2.15% for first use with under 5% down, 1.5% with 5% or more, 1.25% with 10% or more) and is higher for subsequent use with less than 5% down (3.3%). Refinance types have their own fees, listed in the table above.
Applying for a VA loan
- Request your Certificate of Eligibility through the VA.
- Choose a VA-approved lender and get Loan Estimates from several.
- Have the property appraised to VA standards.
- Close and, if applicable, pay or finance the funding fee.
🔤 Key terms
| Term | Meaning |
|---|---|
| Certificate of Eligibility (COE) | Document that shows the VA you are eligible for the loan benefit |
| Funding fee | One-time fee paid to the VA that helps sustain the program |
| IRRRL | Interest rate reduction refinance loan, a streamlined VA refinance with a lower fee |
| Entitlement | The amount the VA will guarantee for your loan |
Scenarios
| Situation | What to consider |
|---|---|
| You have a service-connected disability rating | You may be exempt from the funding fee |
| You can put 10% or more down | The funding fee is lower (1.25% for first use) |
| You want to lower your rate on an existing VA loan | Ask about an IRRRL and compare the 0.5% fee with your savings |
Questions to ask a VA lender
- What are your lender fees on a VA loan compared to conventional?
- Can you provide a Loan Estimate for both?
- What appraisal timeline should I expect?
- How will the funding fee be shown and can it be financed?
🧮 Example: funding fee on a $350,000 loan, first use, less than 5% down
At 2.15%, the funding fee is $7,525. If financed, the loan becomes $357,525. With 10% down the same purchase would carry a 1.25% fee instead. Illustration using the rates published by the VA.
⚠️ Common mistakes to avoid
- Assuming VA loans have no closing costs — they do, though some fees are limited.
- Overlooking funding-fee exemptions you might qualify for.
- Forgetting to add the financed fee when comparing payments.
- Not getting competing Loan Estimates because the program is “standard”.
🛠️ Try it yourself
❓ Frequently asked questions
Is there mortgage insurance on VA loans?
No monthly mortgage insurance; there is a one-time funding fee unless exempt.
Can I use a VA loan more than once?
Yes, but the funding fee is higher for subsequent use with less than 5% down.
Who is exempt from the funding fee?
For example, borrowers receiving VA compensation for a service-connected disability and certain surviving spouses; see the list above.
Can a VA loan be used for a second home?
VA loans are for a primary residence; check VA guidance for details.
Does the VA lend the money?
No; the VA guarantees loans made by private lenders.
📚 Sources
This guide is general information, not financial, tax or legal advice. Rules and limits change; confirm with the sources above or a licensed professional.