The Truth About the VA Funding Fee
Many VA borrowers have questions about the VA Funding Fee. Is it required? How much is it? Where does the money go? The VA Funding Fee has some nuances so it can be kind of confusing. We’re here to answer these questions and help you understand the fee unique to VA loans.
What Is the VA Funding Fee?
All VA loans are subject to a VA Funding Fee, though some borrowers may be entitled to a fee waiver. The fee is charged by the VA and collected by the lender. It helps pay VA costs to administer the VA home loan guaranty program reducing the taxpayer burden, and enables the VA to back a portion of every VA loan. Because the backing secures enough of each loan for the lender, they can then pass the savings on to borrowers in the form of no down payments and no monthly private mortgage insurance (PMI).
How Do You Pay the Funding Fee?
You can opt to pay the funding fee up front, at closing, or roll it into the loan. We encourage borrowers to pay up front if they can. That’s because rolling the fee into the loan means you will be adding it to your balance and will be charged interest on that amount. So, you’ll end up paying more for the fee over time.
Who Gets a VA Funding Fee Waiver?
Your Certificate of Eligibility (COE) will tell the lender whether you can receive a VA Funding Fee waiver.
You do not have to pay the fee if one of these scenarios applies:
- You’re a Veteran receiving VA compensation for a service-connected disability.
- You’re a Veteran who would be entitled to receive VA disability for a service-connected disability if you weren’t already getting retirement or active duty pay.
- You’re a surviving spouse of a Veteran who is eligible for VA home loan benefits.
- You’re a Veteran on active duty who, before or on the loan closing date, provides evidence of having received the Purple Heart.
- You're a Veteran who has received a proposed or memorandum rating before the loan closing date that says you’re eligible.
How Much Is the VA Funding Fee?
These tables help explain the funding fee schedule for each type of loan and borrower situation.
VA Funding Fees for Purchase Loans
less than 5% down payment:
10% or more down payment:
VA Funding Fees for Cash-Out Refinances
VA Funding Fees for Other VA Loan Transactions
Everybody (Unless Exempt*)
Streamline Refinances (IRRRLs)
What Is the Bottom Line?
Understanding the VA Funding Fee can help you make the most out of your home loan benefit. If you are just thinking about a loan, or are ready to start your loan, Veterans First's specialized lending team is here to help you without obligation.
