VA Funding Fee Explained: Rates, Exemptions & How to Pay (2026)
The VA funding fee is a one-time charge paid when you close on a VA loan. It's the main cost that replaces private mortgage insurance (PMI) — and it helps keep the VA home loan program running without costing taxpayers money. Here's everything you need to know: current 2026 rates, who qualifies for an exemption, and whether you should roll it into your loan or pay it upfront.
What Is the VA Funding Fee?
The VA funding fee is a percentage of the loan amount charged by the Department of Veterans Affairs on every VA-guaranteed home loan. It is paid either at closing (upfront) or rolled into the total loan balance. The fee goes directly to the VA and is used to fund the loan guarantee program — meaning future veterans can access the same no-down-payment benefit you're using.
Unlike conventional loans where you pay PMI every month until you reach 20% equity, the VA funding fee is a single one-time charge. Even if you roll it into your loan, you're not paying a monthly insurance premium — you're just amortizing a slightly larger loan balance.
VA Funding Fee Rates for 2026
The rate you pay depends on three factors: whether it's your first VA loan or a subsequent use, your service type, and your down payment amount. Veterans with a down payment of 10% or more get the lowest rate regardless of service type.
| Use & Service Type | 0% Down | 5–9.99% Down | 10%+ Down |
|---|---|---|---|
| First Use — Regular Military | 2.15% | 1.50% | 1.25% |
| Subsequent Use — Regular Military | 3.30% | 1.50% | 1.25% |
| First Use — Reserves/Guard | 2.40% | 1.75% | 1.50% |
| Subsequent Use — Reserves/Guard | 3.30% | 1.75% | 1.50% |
Example: If you're a Regular Military veteran using a VA loan for the first time with no down payment on a $350,000 home, your funding fee is 2.15% × $350,000 = $7,525. You can roll this into your loan, making the total financed amount $357,525.
Who Is Exempt from the VA Funding Fee?
Certain veterans and surviving spouses are completely exempt from paying the VA funding fee. If you qualify for an exemption, you pay $0 — regardless of the loan amount, down payment, or whether it's your first or subsequent use.
You are exempt if:
- You receive VA compensation for a service-connected disability rated at 10% or higher
- You are a veteran who would be entitled to compensation for a service-connected disability but are receiving military retirement pay instead
- You are an active-duty service member who has received the Purple Heart
- You are a surviving spouse of a veteran who died in service or from a service-connected disability (and you have not remarried)
- You have a disability rating pending at the time of closing — if the rating is later approved, you may be entitled to a refund
Disability Rating and Funding Fee Refunds
One important situation: if you closed on your VA loan and later received a VA disability rating, you may be owed a full refund of the funding fee you paid. This is a common scenario — a veteran applies for a disability rating during or after the home purchase process, and it gets approved retroactively.
To claim the refund, contact your VA regional loan center with your disability determination letter. The refund is typically issued as a check or credited against your remaining loan balance if you financed the fee.
Should You Roll the Funding Fee Into Your Loan?
The vast majority of borrowers roll the VA funding fee into their loan rather than paying it out of pocket at closing. Here's how to think about the decision:
Arguments for rolling it in
- Preserves your cash for moving costs, home repairs, or an emergency fund
- Slightly increases your monthly payment (typically $30–$50/month on a $350,000 loan)
- Makes sense when you plan to stay in the home long-term and build equity naturally
Arguments for paying upfront
- Reduces your total loan balance, saving interest over the life of the loan
- Makes sense if you have the cash available and want to minimize your monthly payment obligations
- Useful if you plan to sell within a few years (you'll build equity faster)
At a 6.5% interest rate over 30 years, rolling in a $7,525 funding fee costs approximately $9,100 in total additional interest. That's $1,575 in interest on top of the fee itself. For most borrowers, preserving liquidity is worth this cost — but it's a personal decision based on your savings and timeline.
Funding Fee vs. PMI: Which Costs More?
PMI on a conventional loan with less than 20% down typically costs 0.5%–1.5% of the loan amount per year. On a $350,000 loan, that's $1,750–$5,250 annually, or $145–$440 per month. You pay PMI every month until you reach 20% equity — which typically takes 7–10 years.
The VA funding fee is a one-time charge. At 2.15% on a $350,000 loan, it's $7,525 total. Even without a disability exemption, most veterans save significantly compared to years of PMI payments on a comparable conventional loan.
Calculate Your Exact Funding Fee
Use our free VA loan calculator to see exactly how the funding fee applies to your specific loan — including the impact on your monthly payment when rolled in.
Calculate My VA Funding Fee →