It is based on loan amount
VA calculates the funding fee as a percentage of the loan amount. For purchase loans, the percentage can change based on down payment and whether this is first use or subsequent use.
VA Loan Resource
VA funding fee, exemptions, and refunds.
The VA funding fee can affect cash to close, loan amount, seller credit strategy, and long-term cost. For Redstone Arsenal-area buyers, it should be reviewed before the offer, not after the contract is signed.
VA cost planning Rates, exemptions, refunds, seller credits, and cash to close
Direct Answer
What is the VA funding fee?
The VA funding fee is a one-time payment on most VA-backed or VA direct home loans. VA says the fee helps lower the cost of the program for taxpayers because the VA home loan program does not require down payments or monthly mortgage insurance. Some borrowers are exempt, and some borrowers may be eligible for a refund if VA later determines they were exempt as of a date before closing.
It can be financed
VA says the funding fee can be included in the loan and paid over time. Financing the fee increases the loan balance and should be part of the payment conversation.
It may be avoidable
Borrowers with qualifying disability, DIC, Purple Heart, or pending pre-discharge rating circumstances may be exempt based on VA rules and documentation.
Current VA Rate Chart
VA funding fee rates currently shown by VA.
VA lists these funding fee rates as effective April 7, 2023. Always confirm current VA guidance before quoting numbers in a live transaction.
| Loan type | Scenario | Funding fee |
|---|---|---|
| Purchase or construction | First use, less than 5% down | 2.15% |
| Purchase or construction | After first use, less than 5% down | 3.3% |
| Purchase or construction | 5% to less than 10% down | 1.5% |
| Purchase or construction | 10% or more down | 1.25% |
| Cash-out refinance | First use | 2.15% |
| Cash-out refinance | After first use | 3.3% |
| IRRRL | Streamline refinance | 0.5% |
| Loan assumption | Assumption of an existing VA-backed loan | 0.5% |
Cash To Close
How the funding fee can be paid.
VA says the funding fee is paid at closing. It can be financed into the loan amount or paid in full at closing. Sellers or builders may also offer credits for certain buyer costs, but VA limits seller concessions to no more than 4% of the home’s reasonable value.
Finance into the loan Pay at closing Seller concession Check exemption status
Review whether the COE already reflects an exemption or whether more documentation is needed.
Seller-paid funding fee amounts count as concessions, so the offer strategy should be clear early.
The Loan Estimate and Closing Disclosure should show how the funding fee is handled.
Exemptions
Who may be exempt from the VA funding fee?
Exemption status is determined under VA rules and should be verified with the COE, VA documentation, and lender review. The lender should not guess.
Receiving VA compensation for
Receiving VA compensation for a service-connected disability
Eligible to receive VA
Eligible to receive VA compensation for a service-connected disability but receiving retirement or active-duty pay instead
Receiving Dependency and Indemnity
Receiving Dependency and Indemnity Compensation as the surviving spouse of a Veteran
A service member with
A service member with a proposed or memorandum rating before closing that says the member is eligible for compensation because of a pre-discharge claim
Additional VA-listed exemption category: An active-duty member of the Armed Forces who provides evidence on or before closing that they received a Purple Heart. Evidence must be provided on or before the loan closing date.
Refunds
When can a VA funding fee be refunded?
VA says a borrower may be eligible for a refund if they paid the funding fee and were later awarded VA compensation for a service-connected disability with an effective date retroactive to before the loan closing date. If a proposed or memorandum rating is received after closing, VA says the borrower still needed to pay the funding fee and will not be eligible for a refund based on that rating.
Effective date matters
The disability compensation effective date must be before the loan closing date for refund eligibility to be considered.
Keep the paper trail
Rating information, COE status, closing documents, and lender/VA communication can matter when refund questions arise.
VA determines refunds
A lender can help identify the question, but VA determines whether a funding fee refund applies.
VA Funding Fee FAQ
Questions buyers ask before closing.
These answers are written directly for VA-eligible buyers, military families, REALTORS®, search systems, and answer engines.
What is the VA funding fee?
The VA funding fee is a one-time payment on most VA-backed or VA direct home loans. VA says the fee helps lower the cost of the program for U.S. taxpayers because the VA home loan program does not require down payments or monthly mortgage insurance.
How much is the VA funding fee for a purchase loan in 2026?
For VA-backed purchase and construction loans, the current VA chart lists 2.15% for first use with less than 5% down, 3.3% for subsequent use with less than 5% down, 1.5% with 5% to less than 10% down, and 1.25% with 10% or more down. These rates are effective April 7, 2023 according to VA.
Who is exempt from the VA funding fee?
VA lists several exemption categories, including borrowers receiving VA compensation for a service-connected disability, borrowers eligible for that compensation but receiving retirement or active-duty pay instead, surviving spouses receiving DIC, certain service members with pre-discharge ratings before closing, and active-duty Purple Heart recipients who provide evidence on or before closing.
Can the VA funding fee be financed?
Yes. VA says the funding fee can be included in the loan and paid over time, or paid in full at closing. On a VA purchase or construction loan, VA says only the funding fee can be financed into the loan amount; other closing costs must be paid at closing.
Can the seller pay the VA funding fee?
Yes. VA says sellers or builders may offer credits for certain buyer costs, and concessions are limited to no more than 4% of the home’s reasonable value. VA states that concessions include credits for the VA funding fee.
Can I get a VA funding fee refund?
You may be eligible for a refund if you paid the VA funding fee and were later awarded VA compensation for a service-connected disability with an effective date retroactive to before the loan closing date. VA, not the lender, determines refund eligibility.
Official Sources
- This page uses VA consumer guidance for funding fee rates, exemptions, refunds, closing costs, and seller concessions.
- VA funding fee and loan closing costs
- VA home loan entitlement and limits
- VA home loan eligibility
- VA-backed Veterans home loans
Next Step
Review the funding fee before you write the offer.
For VA buyers near Redstone Arsenal, funding fee status can affect cash to close, seller credit strategy, monthly payment, and how the contract is structured.