VA Funding Fee
2026 rates, who’s exempt, and what pre-approval misses
The VA funding fee is a one-time charge on most VA-backed home loans.
The rate depends on your down payment, whether you’ve used your VA benefit before, and the loan type.
Some veterans owe nothing at all.
This article is for veterans, service members, and surviving spouses buying or refinancing a home.
You’ll know the 2026 rates, who’s exempt, and the pre-approval mistake many veterans miss.
Starting in 2026, the funding fee is also tax deductible for eligible borrowers who itemize.
In This Article
What Is the VA Funding Fee?
The VA funding fee is a mandatory, one-time charge on VA home loans. It goes directly to the Department of Veterans Affairs. The fee helps fund the VA Home Loan Guaranty program so it stays available for future veterans without relying on taxpayer dollars. The VA recently confirmed it has now guaranteed its 29 millionth home loan, a milestone that reflects how the funding fee structure keeps the program financially self-sustaining.
Because of the funding fee, VA loans don’t require private mortgage insurance. That’s a meaningful trade-off. PMI on a conventional loan typically costs between 0.5% and 1.5% of the loan amount every year. The VA funding fee is a single, one-time charge. For most borrowers, the math still favors the VA loan over time.
The fee applies to most VA purchases and refinances. Not every veteran pays it, though. Certain service-connected disability ratings and other qualifying conditions trigger a full exemption.
VA Funding Fee Rates for 2026
Three things determine your rate: whether this is your first time using a VA loan, how much you put down, and what type of loan you’re getting. The rates below are set by VA guidelines and have been in effect since April 2023.
For purchase loans with no down payment, first-time users pay 2.15% and subsequent users pay 3.30%. Put at least 5% down and both groups drop to 1.50%. Put 10% or more down and the rate falls to 1.25% for both. Those reductions apply whether it’s your first VA loan or your fourth.
| Loan Type | Down Payment | First Use | Subsequent Use |
|---|---|---|---|
| Purchase | None (0%) | 2.15% | 3.30% |
| Purchase | 5% to 9.9% | 1.50% | 1.50% |
| Purchase | 10% or more | 1.25% | 1.25% |
| IRRRL Refinance | N/A | 0.50% | 0.50% |
| Cash-Out Refinance | N/A | 2.15% | 3.30% |
The gap between first-use and subsequent-use rates on a zero-down purchase is 1.15 percentage points. That sounds small. On a $450,000 loan, first-use comes to $9,675 and subsequent use comes to $14,850. That’s a $5,175 difference. If you roll the fee into the loan, the gap grows further because you’re paying interest on that higher balance. Confirming your use status before pre-approval matters.
Down payment can also work as a fee reduction strategy. Putting 5% down on a $400,000 home costs $20,000 upfront but saves $2,600 in funding fee, dropping the rate from 2.15% to 1.50%. Putting 10% down saves $3,600 versus zero down. Whether that trade-off makes sense depends on your cash reserves and how long you plan to stay. Understanding what lenders look at when evaluating your loan can help you run that comparison before you commit.
Who Qualifies for a VA Funding Fee Exemption
Not every veteran pays the funding fee. The VA grants full exemptions to several groups. Check VA eligibility guidelines for the complete list. The most common exemptions include:
- Veterans receiving VA compensation for a service-connected disability rated at 10% or higher
- Veterans who qualify for disability compensation but receive active duty pay or retirement pay instead
- Active duty service members who received a Purple Heart and close on the home while still on active duty
- Surviving spouses of veterans who died in service or from a service-connected disability, who receive Dependency and Indemnity Compensation (DIC)
If you qualify for an exemption, the funding fee is $0. Not reduced. Gone entirely.
What Happens When a Rating Is Still Pending
This is the part most articles skip. If your disability rating is pending at closing, you generally still owe the funding fee. The exemption requires an official rating on record. A pending rating doesn’t qualify on its own.
But if your rating is later approved with an effective date that falls before your closing date, you may qualify for a refund. That refund doesn’t happen automatically. You have to request it. Veterans who don’t know this rule often leave money on the table because their lender never brought it up. Getting this right requires working with someone who has handled this situation before.
What This Means for Your Situation
If you’ve used your VA loan benefit before, your funding fee rate is 1.15 percentage points higher than a first-time user at zero down. On most home prices in Colorado or Florida in 2026, that difference runs between $3,000 and $6,000. It should be part of your pre-approval calculation from day one. Verify your COE status before you start shopping.
How to Pay the VA Funding Fee
You have two options: pay the fee in full at closing, or roll it into your loan balance. Rolling it in is more common. It means you don’t need extra cash at closing, but your loan amount goes up by the full fee.
Here’s what that looks like in real numbers. On a $400,000 purchase with a 2.15% first-use rate, the fee is $8,600. Roll that into the loan and your starting balance becomes $408,600. At 6.5% over 30 years, that extra $8,600 adds roughly $55 more per month. If you can pay it at closing without stretching your finances, you’ll save that ongoing cost. If you need to preserve cash, rolling it in is a reasonable and accepted choice.
One development worth knowing about for 2026: the VA funding fee is now tax deductible for eligible borrowers who itemize. The VA confirmed this change in early 2026. You report it on Schedule A as an upfront mortgage insurance premium. If you paid the fee at closing, you may be able to deduct the full amount in that tax year. If you rolled it in, you’d typically deduct it over the life of the loan. Talk to a tax professional about how this applies to your situation, since the deduction only helps if your itemized deductions exceed the standard deduction.
The COE Problem That Costs Veterans Thousands
Most loan officers run pre-approval numbers before pulling the Certificate of Eligibility. The COE is the document that confirms VA eligibility. It also shows whether this is a first-time or subsequent use and whether any exemption is on file.
When a lender skips the COE and runs pre-approval, they make an assumption. Often they assume first use. If the borrower has used the VA benefit before, that assumption is wrong by 1.15 percentage points. On a $450,000 loan, the fee estimate is off by more than $5,000. That changes the qualifying loan amount when the fee is rolled in. It also changes what the buyer thinks they can afford, which affects the price range they’re shopping.
“We pull the COE at the start of pre-approval, not after. The reason is simple: first-use versus subsequent-use versus exempt are three completely different financial situations. I’ve seen buyers come to us after another lender ran their pre-approval, and the funding fee assumption was just flat wrong. That error ripples through the whole purchase price calculation. By the time it gets corrected, the buyer is either short on money or looking at a lower loan amount than they expected.”
— Reed Letson, Owner, Elevation Mortgage
Subsequent Use VA Loan: A Colorado Springs Buyer’s Pre-Approval Problem
A veteran in Colorado Springs had purchased a home near Fort Carson several years earlier using his VA benefit. When he came back to buy a second home, his first lender ran pre-approval assuming a 2.15% first-use rate. No one pulled the COE.
He went under contract on a $475,000 home. When the actual COE came back showing subsequent use, the funding fee jumped to 3.30%. That was an unexpected $5,463 difference. He had to either reduce his offer price, bring extra cash to closing, or start the search over.
We verified his COE first and had the correct numbers before he made a single offer. That step takes minutes and protects the rest of the process.
Colorado and Florida both have large active military populations and competitive housing markets. Near Fort Carson in Colorado Springs, Buckley Space Force Base in Aurora, and Peterson Space Force Base, VA buyers are common and multiple-offer situations are real. The same is true near MacDill Air Force Base in Tampa and Eglin Air Force Base in the Florida Panhandle. Our Colorado mortgage team and our Florida mortgage team see this COE timing issue regularly. A pre-approval built on the wrong funding fee assumption gives you a number you can’t fully trust when offers need to be competitive.
Run the Numbers Before You Start Shopping
Our first-time buyer tools let you estimate your payment, check affordability based on your income, and compare loan options side by side — before you ever talk to a lender.
Open the First-Time Buyer ToolsCommon Mistakes Veterans Make With the VA Funding Fee
Assuming First-Use Rates on a Second VA Loan
Veterans who used the VA benefit years ago often don’t realize they’ll pay the higher subsequent-use rate. On a $400,000 home with no down payment, that assumption costs $4,600 more than expected. Confirm your COE status before you go shopping, not after you go under contract.
Not Checking for a Disability Exemption
Some veterans with service-connected ratings don’t realize they’re exempt from the fee entirely. If your rating is 10% or higher, you owe nothing. Confirm your status through the VA or your lender before closing, because your COE must show the exemption for it to apply.
Missing the Refund After a Retroactive Rating
If you paid the funding fee at closing and later received a disability rating with an effective date before that closing, you may qualify for a full refund. This requires a request from you. It won’t happen automatically, and many veterans never claim it because no one told them it was possible.
Questions to Ask Your Lender
- Will you pull my Certificate of Eligibility before running pre-approval numbers?
- Is this my first use or subsequent use of the VA benefit, and how does that change my funding fee?
- Do I qualify for a funding fee exemption based on my disability rating or survivor status?
- If I roll the funding fee into my loan, how does that change my monthly payment and total loan amount?
- If my disability rating is still pending, what happens at closing? And what should I do if the rating is approved after we close?
- Does putting 5% or 10% down make sense in my situation given the funding fee reduction I’d receive?
Find Out What Actually Drives Your Approval
Credit score is just one piece. Income, debt, assets, and loan type all factor in. Our approval guide breaks down what lenders actually look at and what you can do about it.
See What Affects Your ApprovalFrequently Asked Questions
Yes. You can roll the full funding fee into your loan balance instead of paying it at closing. If your fee is $8,600 on a $400,000 purchase, your loan becomes $408,600. The trade-off is a higher monthly payment and more interest paid over time. For buyers who want to preserve cash, rolling it in is a common and accepted option under VA guidelines.
In most cases, you still pay the funding fee at closing. The exemption requires an official disability rating on record at that time. However, if your rating is later approved with an effective date before your closing date, you may be eligible for a refund. That refund won’t happen automatically. You’ll need to request it through the VA, so keep your closing documentation and the effective date of your rating on file.
Yes, starting with tax year 2026, the VA funding fee is deductible for eligible borrowers who itemize. The VA confirmed this change in early 2026. You report it on Schedule A as an upfront mortgage insurance premium. If you paid the fee at closing, you may be able to deduct the full amount in that tax year. Talk to a tax professional about how this applies to your specific filing situation, since the deduction only helps if your itemized deductions exceed the standard deduction.
Yes. Once you’ve used your VA home loan benefit once, all future VA purchase and cash-out refinance loans carry the 3.30% rate at zero down. The rate doesn’t reset after a certain number of years. The exceptions are putting at least 5% down, which drops the fee to 1.50%, putting 10% or more down, which drops it to 1.25%, or qualifying for a full disability exemption.
Yes. VA loans don’t require a down payment and carry no monthly mortgage insurance. For most borrowers, the one-time funding fee costs less over the life of the loan than years of PMI payments on a conventional loan. VA loans also tend to come with competitive interest rates. You can review all available mortgage loan program options to compare how the numbers stack up for your situation.
