VA Loan Funding Fee: 2026 Purchase Rates, Exemptions, and Refunds

Direct answer: A non-exempt VA purchase borrower currently pays a one-time funding fee of 1.25% to 3.30% of the loan amount, depending on down payment and whether the VA benefit was used before. The fee may be paid at closing or financed. Certain disability-related, surviving-spouse, and Purple Heart exemptions apply, and some borrowers qualify for a later refund.

What the VA funding fee pays for

The Department of Veterans Affairs describes the funding fee as a one-time payment that helps reduce the program's cost to taxpayers. VA-backed purchase loans generally do not require a down payment or monthly mortgage insurance, but that does not mean every qualifying borrower has a zero-cost loan. The funding fee, lender charges, third-party services, taxes, insurance, prepaid items, and other closing costs still belong in the budget.

The fee is calculated as a percentage of the VA loan amount—not the home's purchase price. It is also different from monthly mortgage insurance. A borrower who finances the fee adds it to the principal balance and then pays interest on that larger balance over time.

Current VA purchase funding-fee rates

The VA table below applies to VA-backed purchase and construction loans for Veterans, active-duty service members, and National Guard and Reserve members. The rates shown by VA have been effective since April 7, 2023 and remained current on the agency page updated January 15, 2026.

“First use” does not mean first-time homebuyer. It refers to whether the borrower has used a VA-backed or VA direct home loan before. VA notes an exception when the only prior use was to purchase a manufactured home. The Certificate of Eligibility and lender's VA process should establish the applicable status for the transaction.

Worked examples on a $400,000 purchase

First use with no down payment: The base loan is $400,000. At 2.15%, the funding fee is $8,600. Paying the fee in cash leaves the base loan at $400,000; financing it produces a starting loan amount of $408,600.

First use with 5% down: A $20,000 down payment produces a $380,000 base loan. At 1.50%, the fee is $5,700. Financing it produces a starting loan amount of $385,700.

First use with 10% down: A $40,000 down payment produces a $360,000 base loan. At 1.25%, the fee is $4,500. Financing it produces a starting loan amount of $364,500.

Subsequent use with no down payment: The $400,000 loan carries a 3.30% fee, or $13,200, before any exemption. Financing it produces a starting loan amount of $413,200.

These examples isolate the funding fee and do not include interest, lender charges, title costs, transfer or recordation taxes, escrows, insurance, or prepaid expenses. Putting more down lowers both the base loan and the fee percentage in some cases, but it also uses cash that might otherwise remain available for repairs or reserves. The right comparison shows total payment and cash after closing—not just the smaller fee.

Who may be exempt from the funding fee?

VA says the funding fee does not apply when one of these conditions is met:

• The borrower receives VA compensation for a service-connected disability.
• The borrower is eligible for that compensation but receives retirement or active-duty pay instead.
• A surviving spouse receives Dependency and Indemnity Compensation.
• A service member received a proposed or memorandum rating before closing that establishes eligibility for compensation through a pre-discharge claim.
• An active-duty member provides evidence on or before closing of receiving a Purple Heart.

The lender verifies funding-fee status through VA documentation, commonly the Certificate of Eligibility and related records. If a disability claim or status change is pending, raise it early so the loan team can determine which records are available before closing. Do not assume an exemption based only on an application that has not yet resulted in qualifying VA status.

When a post-closing refund may be possible

A borrower may qualify for a funding-fee refund if VA later awards compensation for a service-connected disability and makes the compensation effective retroactively to a date before the loan closing. A proposed or memorandum rating received only after closing does not, by itself, create refund eligibility under the VA's published guidance.

If this situation may apply, contact the VA regional loan center and keep the closing documents and VA award information available. The actual refund review and handling depend on the VA determination and how the fee was paid. This is an eligibility process, not an automatic lender credit at closing.

Should you pay the fee in cash or finance it?

VA permits the funding fee to be paid in full at closing or included in the loan. Financing preserves cash but increases the opening principal balance, payment, and interest paid over the period the mortgage remains outstanding. Paying it in cash lowers the debt but increases cash to close.

On a purchase or construction/permanent loan, VA says only the funding fee may be financed; other fees and charges must be handled at closing. Seller or builder credits may cover eligible closing costs, and VA treats payment of the funding fee as a seller concession subject to its rules. Credits, concessions, contract price, appraisal value, and the borrower's required funds should be structured together rather than estimated independently.

A practical VA offer-planning checklist

1. Confirm eligibility and request or update the Certificate of Eligibility.
2. Verify first-use or subsequent-use status and any funding-fee exemption.
3. Calculate the fee from the base loan amount after the planned down payment.
4. Compare paying the fee in cash with financing it into the loan.
5. Budget all other closing costs, taxes, insurance, and prepaid expenses separately.
6. Coordinate seller credits with the actual eligible costs and VA concession rules.
7. If a disability claim is pending, discuss documentation and possible refund procedures before closing.

For a wider comparison, review Dan's VA loan guide, cash-to-close guide, seller-credit guide, and Path 2 Buy process.

Primary sources

• U.S. Department of Veterans Affairs: Funding fee, exemptions, rates, refunds, and closing costs
• U.S. Department of Veterans Affairs: VA-backed homebuying process
• U.S. Department of Veterans Affairs: Home-loan eligibility and Certificate of Eligibility
• Consumer Financial Protection Bureau: Loan Estimate explainer

This article is educational and is not an approval, rate quote, commitment to lend, or individualized legal, tax, credit, or financial advice. VA, lender, borrower, property, appraisal, entitlement, occupancy, funding-fee, and credit requirements apply and can change. All loans are subject to approval. Equal Housing Lender.