The VA funding fee is a one-time charge on most VA-backed or VA direct home loans. For a purchase or construction loan, the current published rate is 1.25% to 3.3% of the loan amount, depending on your down payment and whether it is your first or a subsequent use of the benefit. Certain disability-related borrowers, qualifying Purple Heart recipients and some surviving spouses are exempt. You can usually pay the fee at closing or finance it, and a later disability award can sometimes lead to a refund.
What the VA funding fee pays for
The U.S. Department of Veterans Affairs describes the funding fee as “a one-time payment that the Veteran, service member, or survivor pays on a VA-backed or VA direct home loan.” It helps lower the program’s cost to taxpayers because eligible VA loans generally do not require a down payment or monthly mortgage insurance.
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The fee is a percentage of the loan amount, not automatically a percentage of the home’s purchase price. Your exact charge therefore depends on the amount borrowed after any down payment, the loan type, first or subsequent use, and whether you qualify for an exemption.
VA’s fee page was updated May 26, 2025, and its rate chart is marked effective April 7, 2023. Those dates matter: use the current VA chart for a transaction that closes later if a new law or VA circular changes the rates.
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How much is the fee for a VA purchase or construction loan?
For Veterans, active-duty service members, and National Guard and Reserve members, the published purchase and construction rates are:
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.3% |
| 5% or more, but less than 10% | 1.5% | 1.5% |
| 10% or more | 1.25% | 1.25% |
“First use” and “subsequent use” refer to prior use of the VA loan benefit, not simply whether you have owned a home before. A prior manufactured-home-only use is treated as first use for purposes of the higher subsequent-use rate under the chart’s note.
How to calculate your dollar amount
Use this formula:
Loan amount × applicable funding-fee percentage = funding fee.
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VA’s example illustrates why the purchase price is not the fee base. On a $200,000 home with a $10,000 down payment, the loan amount is $190,000. At a 1.5% rate, the fee is $2,850. That is VA’s published example, not a universal charge for every $200,000 home.
For your own estimate, subtract the down payment from the price (and account for any other amount being financed), identify the correct rate band, and multiply. A lender’s Loan Estimate should show the resulting fee in dollars.
Other VA loan types have different rates
Do not apply the purchase table to every VA transaction. VA’s published chart lists these rates for other loan types:
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| Loan type | Published funding-fee rate | How the rate is applied |
|---|---|---|
| Cash-out refinance | 2.15% for first use; 3.3% for subsequent use | The rate does not change with down payment. |
| Native American Direct Loan purchase | 1.25% | Chart rate for a purchase. |
| Native American Direct Loan refinance | 0.5% | Chart rate for a refinance. |
| Interest Rate Reduction Refinance Loan (IRRRL) | 0.5% | Applies to this refinance program. |
| Manufactured-home loan not permanently affixed | 1% | Chart rate for the stated property type. |
| Loan assumption | 0.5% | Applies when a qualifying borrower assumes a VA loan. |
| Vendee loan for VA-acquired property | 2.25% | Chart rate for that VA-acquired-property loan. |
The cash-out refinance rates are tied to first or subsequent use, but the chart does not reduce them for a 5% or 10% down payment. Confirm the transaction type before using any percentage, especially when a refinance combines cash out, a new purchase, or another program feature.
Who is exempt from the VA funding fee?
Exemption is based on specific status and timing rules. The detailed VA guidance identifies these categories:
- A Veteran receiving VA service-connected disability compensation before closing.
- A Veteran entitled to disability compensation who receives military retirement pay instead of that compensation before closing.
- A Veteran rated by VA before closing as eligible for compensation through a pre-discharge claim that produces a memorandum rating.
- A Veteran entitled to compensation but not receiving it because the Veteran is on active duty.
- An active-duty service member who provides, on or before closing, evidence of a Purple Heart awarded before separation.
- A surviving spouse of a Veteran who died on active duty or from a service-connected disability.
Why timing and documentation matter
The exemption categories are not the same as a general rule that every disabled Veteran is exempt. A pending disability claim by itself does not automatically establish an exemption at closing. Ask the lender or VA what evidence is required for your category and make sure it is available by the applicable deadline. The lender must apply the correct status to the loan file; a borrower should not simply remove the fee from an estimate without confirmation.
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Can you finance the funding fee?
Yes. VA says the fee must be paid at closing, but you may either pay it in cash or include it in the loan. Paying cash requires more money at settlement. Financing preserves that cash but increases the principal balance, so you pay interest on the financed fee over the life of the loan unless you later pay it down or refinance.
Using VA’s $190,000 example, financing a $2,850 fee would make the starting balance $192,850 before considering any other financed amounts. The exact payment impact depends on the note rate and term set by your lender.
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Can the seller pay it?
The funding fee is separate from other closing costs. VA rules allow certain seller concessions to include payment of the funding fee, subject to the applicable concessions limit and the way the purchase contract is written. Have the lender confirm that the proposed credit is permitted and correctly disclosed; do not assume every seller-paid amount can be applied without limit.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Can a disability award after closing produce a refund?
Possibly. VA says a borrower may be entitled to a refund when a disability compensation claim was pending at the time of closing and the eventual award has an effective date that is retroactive to a date before closing. The later award must establish the qualifying entitlement; merely filing a claim after closing does not meet that description.
What to do after an award
- Read the VA decision notice and identify the effective date of the compensation award.
- Compare that effective date with the loan-closing date. The qualifying situation is an effective date before closing while the claim was pending at closing.
- Contact the mortgage servicer or the appropriate VA Regional Loan Center and request review of the funding fee refund.
- Provide the decision notice, closing information, and any evidence the servicer or VA requests.
- Confirm how the refund will be delivered and how it will be applied to your account.
VA guidance says refunds issued on or after July 1, 2019, are paid directly to the Veteran. The servicer or VA Regional Loan Center should confirm the route for your individual file; do not assume the money will arrive automatically or that it will be credited to principal without an instruction.
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1Scan for outdated or missing drivers - takes under a minute2Repair Windows errors before they cause bigger problems3Fix the driver behind crashes, sound loss and screen glitchesHow the fee appears alongside other closing costs
The funding fee is a program charge, not the lender’s compensation. As VA states, “The lender, not VA, sets the interest rate, discount points, and closing costs.” Those lender-set items can differ substantially between lenders even when the VA funding-fee percentage is identical.
Your total cash to close can include the down payment, lender charges, appraisal and other settlement services, prepaid taxes or insurance, and the funding fee if you do not finance it. Some costs may be paid by you, the seller, or shared under the contract and VA rules. Review the Loan Estimate early and the Closing Disclosure before signing so the fee, credits, financed amount, and cash due agree with the terms you accepted.
A practical way to estimate your fee before applying
- Identify the loan type. Decide whether this is a purchase, construction loan, cash-out refinance, IRRRL, Native American Direct Loan, assumption, manufactured-home loan, or another chart category.
- Determine prior VA use. Ask the lender how your previous VA loan history affects first-versus-subsequent-use treatment. Mention any prior manufactured-home-only use.
- Set the down-payment band. For purchase and construction loans, calculate whether the down payment is below 5%, at least 5% but below 10%, or at least 10%.
- Calculate the loan amount. Use the amount borrowed, not the headline purchase price, as the fee base.
- Check exemption evidence. Gather proof of compensation, a memorandum rating, active-duty status, Purple Heart award, or qualifying surviving-spouse status as applicable.
- Choose cash or financing. Ask for both versions of the Loan Estimate so you can see the cash-to-close difference and the financed balance.
- Recheck at closing. Compare the final Closing Disclosure with the approved exemption, rate, loan amount, and any seller credit.
Common mistakes to avoid
- Using the purchase chart for a refinance: request the rate for the exact refinance program, since cash-out and IRRRL transactions have their own rates.
- Multiplying by the purchase price: calculate from the loan amount after the down payment and other loan terms are accounted for.
- Assuming a pending claim guarantees exemption: ask for a documented pre-closing status or qualifying award; a claim alone is not an automatic waiver.
- Treating the fee as negotiable lender pricing: the statutory VA rate and the lender’s interest rate, points, and closing costs are different components.
- Expecting a refund without contacting anyone: a qualifying retroactive award requires follow-up with the servicer or VA Regional Loan Center.
- Ignoring the financed-balance effect: compare the immediate cash savings with the additional principal and interest.
What to remember
The current VA chart makes the fee predictable once you know four facts: loan type, loan amount, first or subsequent use, and down-payment band where applicable. For a standard purchase or construction loan, rates run from 1.25% to 3.3%; cash-out refinances are 2.15% or 3.3% regardless of down payment. Specific disability-related statuses, qualifying pre-discharge ratings, active-duty Purple Heart recipients, and certain surviving spouses can be exempt when the required timing and evidence are satisfied. You can pay the charge at closing or finance it, and a retroactive disability award may support a refund through the servicer or VA.
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