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What Is a VA Funding Fee?

Learn Important Details About the VA Loan Funding Fee

VA loans can help veterans, active duty/reserve military, and surviving spouses qualify for a home loan. But there is one aspect VA loan borrowers may have questions about: the VA funding fee. The VA funding fee is one of the largest VA loan closing costs, so it’s important to know what it is and what it covers.

VA Funding Fee Overview

Most veterans who buy or refinance a home with a VA loan need to pay a one-time funding fee. This fee helps keep the VA loan benefit available for Americans who served in the military. For example, the funding fee allows VA loan qualified homebuyers to purchase a home with no down payment and never have to pay private mortgage insurance (PMI).

How much you’ll pay on the funding fee depends on several factors, such as whether it’s the first time you’ve used your VA loan benefit, if you’re buying a home or refinancing, and your down payment amount. Typically, the cost is lower for your first VA loan and if you make higher down payments. The same goes for VA-backed refinance and cash out refinancing loans.

For example, new homebuyers may pay a first-time-use VA funding fee of 2.15% if their down payment is less than 5%, but 1.25% if their down payment exceeds 10%. For subsequent uses, a smaller down payment would require a 3.3% funding fee, while putting down more than 10% could lower the cost to 1.25%.

VA Funding Fee vs. Mortgage Insurance

The VA funding fee and mortgage insurance both protect the lender from a mortgage default. However, they do so differently.

First, the VA funding fee is a one-time payment paid at closing and often rolled into the mortgage. Essentially, it replaces mortgage insurance and compensates the VA for its guarantee. This reduces lender risk, allows no-down-payment options, and helps keep the program sustainable to continue providing affordable home financing for veterans.

Mortgage insurance, like PMI or MIP, is a key way lenders protect themselves against default on home purchases with low down payments. Borrowers pay these fees monthly as part of their mortgage payments.

VA Funding Fee Rates in 2025

The VA funding fees can change annually or through legislation. The most recent rate changes took place in 2020 and are in effect through 2026 (when they’ll be reevaluated). Each type of VA loan also has its own fee structure, so purchase loans may have different rates than VA streamline refinance loans.

Other factors that determine the VA funding fee amount are:

The amount of your down payment
Whether this is the first time you’ve used your VA loan entitlement to finance a home
If you’ve used some of your entitlement and not repaid it

VA Loan Funding Fee Chart for Home Purchases

Veterans, active-duty personnel, and members of the National Guard and reserves are all charged based on the same funding fee structure. Here’s the VA funding fee chart for purchases:

Usage	If your down payment is...	Your VA funding fee is...
First use	Less than 5%	2.15%
	5% up to 10%	1.5%
	10% or more	1.25%
After first use	Less than 5%	3.3%
	5% up to 10%	1.5%
	10% or more	1.25%

Chart source: The U.S. Department of Veterans Affairs website.

VA Loan Funding Fee Chart for Streamline Refinances

You can refinance a VA loan with Interest Rate Reduction Refinance Loans (IRRRLs), which are also called VA streamline refinances. These loans let veterans and active-duty personnel refinance with less paperwork and faster closings.

All veterans and service members pay the same rate, and your funding fee is not affected by your down payment or whether you’ve used your loan entitlement in the past. Here is the VA funding fee chart for streamline refinances:

Loan type	VA funding fee
Interest Rate Reduction Refinancing Loans (IRRRLs)	0.5%

Chart source: The U.S. Department of Veterans Affairs website.

VA Loan Funding Fee Chart for Cash Out Refinances

VA funding fees also apply to cash out refinances. Cash out refinances let you borrow cash from your home’s equity. You’ll replace your existing mortgage amount with a new VA loan with a higher amount, then get the difference in cash, at closing. Veterans and service members pay the same rate, although you will pay more if you’ve used your entitlement for a VA cash out refinance before.

First use	After first use
2.15%	3.3%

Chart source: The U.S. Department of Veterans Affairs website.

How to Pay the VA Funding Fee

You can pay your funding fee at closing or roll it into your loan, as part of your standard closing costs. This means you’ll either have higher up-front costs or pay slightly more principal and interest back over the life of the loan. Most VA homebuyers roll the funding fee into their VA loan. However, paying it at closing can save you money.

Is the VA Funding Fee Tax Deductible?

The VA funding fee used to be tax-deductible alongside mortgage insurance premiums (MIP). However, the ability to deduct MIP and the funding fee expired in 2021. Other closing costs, such as property taxes and prepaid mortgage interest, may be tax-deductible. Consult with a tax professional for specific guidelines.

Who is Exempt from the VA Funding Fee?

Some disabled veterans and surviving spouses are exempt from paying the VA funding fee. You may qualify for an exemption if you’re:

Receiving VA compensation for a service-related disability
Receiving retirement or active-duty pay instead of compensation for a service-related disability
Receiving Dependency and Indemnity Compensation (DIC) as the surviving spouse of a Veteran
Eligible for compensation through a pre-discharge claim before the loan closing date
An active-duty Purple Heart recipient on or before the loan closing date

Learn more about who is eligible to wave the VA loan funding fee on the VA website.

VA Funding Fee Refund Eligibility and Process

Anyone eligible for an exemption may get a refund on the VA funding fee. You may qualify if you’re receiving disability or retirement pay, have a pre-discharge claim, received a Purple Heart, or are a surviving spouse receiving DIC. Also, you may get a refund if there’s a loan processing error.

To get a VA funding fee refund, you’ll need to have:

Your closing documents
Your Certificate of Eligibility (COE)
Proof of your refund eligibility, such as a disability award letter
Your current mortgage statement

To get the process started, you’ll call your regional VA loan center to request the refund. Then, you’ll submit the documents and wait for the refund, which could take a few weeks or months. Also, be aware that the VA loan center may have you work directly with your lender.

Final Thoughts: VA Home Loan Funding Fee

The VA funding fee is an essential part of getting a VA home loan, as it helps fund the program to make homeownership a reality for more military community members and their families. While it’s an upfront cost you need to plan for, it does replace the need to pay mortgage insurance. To find out how much your could save with your hard-earned benefit to buy a home with a VA-backed mortgage, consider getting prequalified for more insight into how Freedom Mortgage can help you today.