What Is the VA Funding Fee?

The VA funding fee is a mandatory, one-time charge on VA 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.

Because of the funding fee, VA loans don't require private mortgage insurance (PMI). That's a meaningful trade-off. PMI on a conventional loan typically costs 0.5% to 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. The program has backed more than 28 million loans since 1944, in part because the funding fee structure keeps it financially sound.

The fee applies to most VA purchases and refinances. However, not every veteran pays it. Certain service-connected disabilities and other qualifying criteria trigger a full exemption. We'll cover those below.

What the VA Funding Fee Costs in 2026

The rate you pay depends on three things: whether it's your first time using a VA loan, how much you put down, and what type of loan you're getting. For 2026, per VA guidelines, purchase loans with no down payment carry a 2.15% fee for first-time use and a 3.30% fee for subsequent use.

Put a down payment down and the fee drops for both groups. With 5% to 9.9% down, the fee falls to 1.50%. With 10% or more, it drops further to 1.25%. Those reductions apply equally whether it's your first VA loan or your fourth.

The gap between first-use and subsequent-use rates on a no-down-payment purchase is 1.15%. That sounds small. But 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, it increases your balance and your monthly payment. The IRRRL refinance fee of 0.50% applies whether it's your first or fifth time refinancing.

Who Is Exempt From the VA Funding Fee

Not every veteran has to pay the funding fee. The VA exempts several groups entirely, based on disability status and other qualifying criteria. You can check VA eligibility guidelines for the full list, but the most common exemptions are:

• Veterans receiving VA compensation for a service-connected disability rated at 10% or higher
• Veterans who would receive disability compensation but currently receive active duty pay instead
• Active duty service members who have received a Purple Heart and close on the home while on active duty
• Surviving spouses of veterans who died in service or from a service-connected disability, who receive Dependency and Indemnity Compensation (DIC)

What Happens When a Rating Is Still Pending

This is the part most articles skip. If your disability rating is pending at the time of closing, you generally still owe the funding fee. The exemption requires an official rating on record. You can't claim it based on an expected outcome.

However, if your rating is later approved with an effective date that falls before your closing date, you may qualify for a refund of the fee. This 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. This is exactly the kind of detail that gets missed when veterans work with lenders who don't specialize in VA loans.

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 increases by the 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 costs roughly $55 more per month. Over the life of the loan, you'll pay more in interest. But for buyers who need to preserve cash, rolling it in often makes sense. If you can pay it at closing without stretching your finances, you'll save that ongoing cost.

How the Funding Fee Affects Your Purchasing Power

The COE Problem Most Lenders Skip

Most loan officers run pre-approval numbers before pulling the Certificate of Eligibility (COE). 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're making an assumption. Often they assume first-use. If the borrower has actually used their VA benefit before, that assumption is wrong by 1.15%. 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 being rolled in. It can also change 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

Why This Matters More in Competitive Markets

Colorado and Florida both have large military populations and active housing markets. Near Fort Carson in Colorado Springs, Buckley Space Force Base in Aurora, and Peterson Space Force Base, VA buyers are common. So are multiple-offer situations. The same is true near MacDill Air Force Base in Tampa and Eglin AFB in the Panhandle. Veterans buying in those areas work with our Colorado mortgage team or our Florida mortgage team, and both see this same COE timing issue regularly.

A pre-approval with the wrong funding fee baked in gives you a number you can't fully trust. In competitive markets, that matters a lot. You may offer on homes slightly above what you can actually finance, or the deal falls apart when the corrected numbers come in. Getting this wrong early can delay closing or change your loan options entirely, which is why it's worth talking through your situation before you go too far down a path.

Common Mistakes Veterans Make With the VA Funding Fee

These aren't hypothetical. We see these patterns regularly with veterans in Colorado and Florida.

Mistake 1: 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 shopping.

Mistake 2: Not Asking About Disability Exemptions

Some veterans with service-connected disability ratings don't realize their rating exempts them from the fee. If your disability rating is 10% or higher, you may not owe anything. Confirm your status through the VA or with your lender before closing.

Mistake 3: 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 refund. This refund requires a request. It won't happen automatically, and many veterans never claim it because no one told them it existed.