Veterans
The VA Funding Fee Explained
What the VA funding fee is, why it exists, who is exempt, how down payment and prior use change it, and whether to finance it into the loan.
Updated 2026-08-21| Applies to: Anyone using VA financing to purchase or refinance.
The short answer
The VA funding fee is a one time charge that helps sustain the VA loan program in place of monthly mortgage insurance. The amount varies with the type of transaction, the down payment and whether you have used the benefit before. Certain veterans, including many receiving service connected disability compensation, are exempt, and the fee can usually be financed into the loan.
Why the fee exists
VA loans do not carry monthly mortgage insurance even with no down payment. The funding fee is the mechanism that keeps the program self sustaining, which is why the total cost of a VA loan is often lower than a comparable low down payment conventional or FHA loan over time.
What changes the amount
- Whether it is a purchase, a cash out refinance, or an interest rate reduction refinance
- Whether you make a down payment, and how large it is
- Whether this is your first use of the benefit or a subsequent use
Exemptions
Veterans receiving compensation for a service connected disability are commonly exempt, as are certain surviving spouses and some other categories. Exemption status appears on the Certificate of Eligibility, and a refund is possible when a disability rating is granted retroactively.
Finance it or pay it
Financing the fee preserves cash but adds to the balance and to interest over time. Paying it up front costs cash today. Neither is universally right, and the decision usually follows how much cash you need to keep after closing.
If you have a disability rating pending, tell me before we close. Timing can determine whether you pay the fee at all.
Educational purposes only. Refinance and VA loan guidelines vary by program, borrower circumstances, property type, entitlement status, documentation and lender requirements. All financing is subject to application, verification, applicable program guidelines and underwriting approval. Not a commitment to lend. Manny Oloyede | Mortgage Broker | NMLS 1824463 | Ultimate Mortgage Brokers LLC. Equal Housing Opportunity.
Frequently Asked Questions
People also ask
Is a down payment ever required on a VA loan?
Not always, but it can depend on your remaining entitlement, the loan amount, and lender-specific requirements, so this should be confirmed for your specific situation.
Read: VA Loan Benefits in OhioDoes VA eligibility expire?
Earned eligibility generally does not expire, though entitlement can be tied up by an existing VA loan.
Read: VA Loan Eligibility and the Certificate of EligibilityCan I have two VA loans at once?
It is possible in certain circumstances when sufficient entitlement remains and occupancy requirements are met.
Read: VA Entitlement and Using a Second VA LoanDo I still live in the home to use an IRRRL?
Prior occupancy generally satisfies the requirement, which makes the IRRRL usable in some situations where you have relocated.
Read: VA IRRRL Streamline Refinance ExplainedHow soon must I move in?
Generally within a reasonable period after closing, with defined exceptions for certain circumstances.
Read: VA Loan Occupancy RequirementsDoes VA require a home inspection?
No. The appraisal includes condition observations, but a separate inspection is strongly recommended.
Read: VA Minimum Property RequirementsTerms used in this guide
- Closing Costs
- The lender, title, government and prepaid costs due at closing, separate from your down payment.
- VA Loan
- A mortgage guaranteed by the Department of Veterans Affairs for eligible service members, veterans and certain surviving spouses, often with no down payment and no monthly mortgage insurance.
Written by
Manny Oloyede, Mortgage Broker
NMLS #1824463 | Ultimate Mortgage Brokers LLC NMLS #2619461 | Licensed in OH | KY | NC | PA | SC | TN | TX
I have worked in mortgage lending since 2018 out of the Akron / Cuyahoga Falls Branch, helping buyers, homeowners and investors across Northeast Ohio and every state where I am licensed. These guides reflect the questions I answer most often, written the way I would explain them on a call.
Keep reading
VA Loan Eligibility and the Certificate of Eligibility
Who qualifies for VA financing, how service requirements work, what a Certificate of Eligibility proves, and how to obtain one.
VeteransVA Loan Benefits in Ohio
Learn about VA loan eligibility, down payment flexibility, mortgage insurance, funding fees, entitlement, occupancy, and property requirements for Ohio veterans.
VeteransVA IRRRL Streamline Refinance Explained
How the VA interest rate reduction refinance loan works, what documentation is reduced, seasoning rules, and how it compares to a VA cash out refinance.
VeteransVA Loan Closing Costs and Who Pays Them
Which closing costs veterans can pay on a VA loan, non allowable fees, how seller concessions work, and how to structure an offer to reduce cash needed.
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