VA funding fee: Who pays and who is exempt?

Compared to other home loan options, the VA-guaranteed home loan stands above the rest. And with great benefits for all comes a minor fee for some, known as the VA funding fee.

What’s the VA funding fee?

The VA funding fee is a one-time payment made by borrowers on VA-guaranteed home loans used to buy, build, improve, or repair a home or refinance a mortgage. This fee helps offset the cost of the program to taxpayers, allowing Veterans to benefit from features like no down payment and no monthly private mortgage insurance.

The fee for first-time homebuyers is typically 2.15% and can be up to 3.3% for subsequent uses. The exact amount depends on factors like the size of the down payment and the number of times the benefit has been used.

Borrowers have flexibility in how they pay the fee: It can be “rolled” into the loan—meaning it’s included in the total loan amount, and the monthly mortgage payment is calculated based on that—or paid out-of-pocket at closing.

As the VA funding fee chart shows, making a larger down payment will reduce the funding fee percentage. And there’s good news for Veterans at tax time: the VA funding fee is now tax-deductible.

For Veterans refinancing or those using a Native American Direct Loan, please check the VA funding fee website for your specific funding fee rate, as they vary.

VA funding fee rates for Veterans, active-duty service members, and national guard and reserve members

Loan UseIf your down payment is…Your VA funding fee will be…

First use Less than 5% 2.15%

First use5% or more 1.5%

First use10% or more 1.25%

After first use Less than 5% 3.3%

After first use5% or more 1.5%

After first use10% or more 1.25%

VA-Backed Cash-Out Refinancing Loans rates for Veterans, active duty service members, and National Guard and Reserve members:

First Use: 2.15%

After first use: 3.3%

Interest Rate Reduction Refinancing Loans (IRRRLs) Funding Fee: 0.5%.

Who’s exempt from the VA funding fee?

There are exceptions to the VA funding fee requirement. According to VA data, since 2021, more than half of Veterans who obtained a VA-guaranteed home loan were exempt from paying the funding fee.

Veterans who meet the following criteria are exempt from paying the VA funding fee:

Receiving VA compensation for a service-connected disability

Eligible to receive VA compensation for a service-connected disability but receiving retirement or active-duty pay instead

Receiving certain Dependency and Indemnity Compensation

A service member who has received a proposed or memorandum rating before the loan closing date that says they are eligible to get compensation because of a pre-discharge claim, or

Currently serving on active duty and who present evidence of having received a Purple Heart on or before the loan closing date

With many other loan products, borrowers typically pay primary mortgage insurance, or PMI, until they reach a certain level of equity in the home (typically 20%). VA home loans do not require primary mortgage insurance because VA guarantees up to 25% of the loan to the lender, should there be a default. Instead, for those required to pay it, the one-time VA funding fee offsets the cost of PMI and helps sustain the program.

In most cases, this fee is much lower than other conventional or government-backed lending programs, and it helps ensure the VA-guaranteed home loan is there for you, and all other Veterans, today and tomorrow.

Veterans should work with their lenders to determine if they will need to pay the VA funding fee or if they are exempt. VA Loan Guaranty Service employees are available to discuss the VA funding fee by calling 877-827-3702 (TTY: 911), Monday through Friday, from 8 a.m. to 6 p.m. ET. Or you can visit online for more information.