What is the VA Funding Fee?

If you qualify for a VA loan, you probably have questions about the VA funding fee. Borrowers pay this fee to help reduce the loan’s cost for US taxpayers, who are footing the bill for your loan. Learn more about why the program uses this fee, how much it costs, and its impact on your loan.

Who Has to Pay the VA Funding Fee?

Using a VA loan to finance purchasing, building, renovating, or refinancing a home most likely means paying the VA funding fee. However, there are VA funding fee exemptions. For example, applicants with a service-related disability may not have to pay this fee. Active military members who have received the Purple Heart may also be exempt.

Widowed spouses of service members using a VA loan to purchase your home may be excluded from having to pay the fee as long as they are receiving Dependency and Indemnity Compensation. Finally, any service member eligible for compensation due to a pre-discharge claim may qualify for VA funding fee exemption.

You generally have three options for paying the fee. First, you can pay it over time along with your other mortgage payments. Or, you can pay it all at once upfront. Sometimes, you may negotiate with the home seller to cover this fee as a concession in your purchase agreement. If you pay the VA funding fee upfront, you will save money over the lifetime of your loan.

How Much Does the VA Funding Fee Cost?

There are already so many costs associated with becoming a homeowner. The last thing you want is another expense. Unfortunately, there isn’t an easy answer to figuring out how much your VA funding fee costs. It varies based on the type of loan you get (home purchase, refinance, etc.) and how much the loan is for. Sometimes, your down payment amount is a factor, as is whether or not you’ve used a VA-backed loan in the past.

The fee used to depend on your role in the military. Previously, service members in the Reserves or the National Guard were paid more than regular service members. As of 2020, these rules have changed so that all service members, regardless of position, pay the same amount.

That said, a first-time borrower can expect to pay around 1.25-2.15% of your loan amount for the VA funding fee. If you’ve borrowed using a VA loan before, the cost increases, often to around 1.25-3.3% of the loan amount. However, if you can make a down payment of at least 5%, the fee might not be as high. These rates are subject to change, so check with your loan officer about where the funding fee currently stands.

So, if your loan amount is $200,000, and you put down 10%, you’ll pay a funding fee of 1.25%, or $2,500.

Find Out More About the VA Funding Fee

Would you still like to find out more about the VA funding fee? The Department of Veterans Affairs is one resource to check out. Its housing assistance arm outlines the most recent VA loan funding fee information.

Updated April 2024