The VA loan funding fee is a required government fee, typically ranging from 0.5% to 3.3% of the loan amount, paid by veterans, active service members, and eligible survivors. This fee helps protect taxpayers by reducing the risk associated with VA-backed loans. While it can usually be rolled into the loan, the fee may be lowered with a down payment of 5% or more or completely waived for those with a service-connected disability.
For veterans and active-duty service members, a VA loan is one of the most powerful home financing tools available, with no down payment, no private mortgage insurance, and competitive interest rates. But there is one cost that often catches borrowers off guard: the VA loan funding fee.
At Sprint Funding, we help veterans understand every line of their loan so there are no surprises at closing. Let’s break down exactly what the funding fee is, how much it costs, and most importantly, how to reduce or even eliminate it.
What Exactly Is the VA Loan Funding Fee?
The VA loan funding fee is a one-time charge paid to the U.S. Department of Veterans Affairs at the time of closing. It is not a fee that goes to your lender or a third-party service provider; it goes directly to the VA to help fund the loan program for future generations of service members.
Think of it as the trade-off for the program’s most attractive benefits. Because VA loans don’t require a down payment or mortgage insurance, the funding fee helps offset the risk the government takes on by guaranteeing these loans. Without it, the VA loan program would not be able to operate without taxpayer subsidies.
The fee is calculated as a percentage of your total loan amount. For most first-time VA loan users who put no money down, that percentage is 2.15% of the loan amount. On a $350,000 home, that comes out to $7,525, a significant but manageable cost given everything the loan program provides.
How Much Is the VA Funding Fee in 2026?
The exact amount depends on several factors: your military category, whether it is your first time using a VA loan or a subsequent use, and how much of a down payment you make (if any). The current rate schedule has been in effect since April 2023 and remains unchanged for 2026.
For purchase loans and construction loans:
- First-time use, no down payment: 2.15%
- Subsequent use, no down payment: 3.30%
- Down payment of 5%–9.99%: 1.50%
- Down payment of 10% or more: 1.25%
For refinance loans:
- Interest Rate Reduction Refinance Loan (IRRRL): 0.50%
- Cash-out refinance: 2.15% (first use) / 3.30% (subsequent use)
One meaningful update for 2026: the VA has confirmed that borrowers can now deduct the funding fee on their federal taxes, treating it similarly to prepaid mortgage interest. If you paid the fee upfront at closing, you may be able to deduct the full amount in the year it was paid. If you rolled it into your loan, you deduct it proportionally as you pay it down. Consult a tax advisor to confirm how this applies to your specific situation.
The fee can also be rolled into your loan amount rather than paid out of pocket at closing, which makes it easier to manage, even if it does add a small amount to your monthly payment.
Who Is Exempt from the VA Funding Fee?
Not everyone has to pay the funding fee. The VA provides full exemptions for certain borrowers, and this is one of the most important things to check before assuming you owe it.
You are exempt from paying the VA funding fee if you:
- Receive VA disability compensation for a service-connected disability
- Are a surviving spouse of a veteran who died in service or from a service-connected disability
- Are a veteran who would be entitled to receive disability compensation but are receiving retirement or active-duty pay instead
- Have a pre-discharge disability rating or memorandum from the VA confirming eligibility
If you are exempt, those savings can be substantial. On a $400,000 loan, a 2.15% funding fee equals $8,600—money that stays in your pocket. Always confirm your disability rating status with your lender before closing, because exemptions must be documented and applied correctly.
Many veterans are unaware they may qualify for an exemption, which is one of the common misconceptions that come up around VA loans, worth clearing up before you apply.
How Can You Reduce the VA Funding Fee?
Even if you are not exempt, there are several legitimate strategies to lower what you pay.
Make a down payment.
The single most effective way to reduce your funding fee is to put money down. Even a 5% down payment drops the fee from 2.15% to 1.50%, and 10% or more brings it down to 1.25%. If you have savings available, running the math on how much the reduced fee saves you versus keeping that cash liquid is worth the time.
Use the IRRRL if you are refinancing.
If you already have a VA loan and want to refinance to a lower rate, the Interest Rate Reduction Refinance Loan carries a much lower funding fee of just 0.50%. This is a significantly better deal than a cash-out refinance and is worth considering if your goal is simply to reduce your monthly payment.
Confirm your disability status before closing.
If you have a pending VA disability claim, it may be worth waiting until a decision is issued before closing. A service-connected disability rating, even a partial one, can qualify you for a full funding fee exemption. Closing before your rating is established means you pay the fee unnecessarily.
Check if you are a surviving spouse.
Eligible surviving spouses who have not previously been identified as exempt should verify their status with the VA and ensure the lender has the correct documentation on file.
Should You Roll the Fee Into Your Loan or Pay It Upfront?
This is largely a personal finance decision. Rolling the fee into your loan means you avoid an out-of-pocket expense at closing, but it increases your loan balance and means you pay interest on that amount over the life of the loan. On a 30-year mortgage, even a few thousand dollars rolled in can cost more in interest than it saves in cash today.
If you have the funds available, paying the fee upfront at closing is generally the more cost-effective choice long-term. But if preserving cash is the priority, especially after a move or during a transition out of service, rolling it in is a reasonable and widely used option.
How the VA Funding Fee Compares to Other Loan Costs
It helps to put the funding fee in context. Borrowers using conventional loans who put less than 20% down typically pay private mortgage insurance (PMI), which can run between 0.5% and 1.5% of the loan amount per year—not once, but annually until they reach 20% equity. On a $350,000 loan, that could mean $1,750 to $5,250 per year in ongoing costs.
The VA funding fee, while paid upfront, is a one-time cost. For most borrowers, the absence of annual PMI more than compensates for it within the first few years of homeownership.
When you factor in the zero down payment benefit and the typically lower interest rates that come with VA loans versus FHA or conventional options, the funding fee rarely changes the overall value proposition of choosing a VA loan.
Make the Most of Your VA Loan Benefits Today!
The VA loan funding fee is a reasonable cost for a program that delivers exceptional value to those who have served. With no required down payment, no ongoing mortgage insurance, and flexible credit requirements, the VA loan remains one of the best mortgage products available, and understanding the funding fee fully puts you in control of how you pay it.
Whether you are buying your first home, refinancing, or exploring your exemption status, the team at Sprint Funding is here to walk you through every detail.
Contact us today to speak with a VA loan specialist who can help you understand your funding fee, check your exemption eligibility, and find the most cost-effective path to homeownership!
Frequently Asked Questions
Does the funding fee apply to VA loans for manufactured homes?
Yes, the VA funding fee applies to eligible VA loans for manufactured homes or modular homes, just as it does for traditional site-built homes.
How does using a co-borrower affect the funding fee?
If both borrowers are eligible veterans, the fee is still calculated based on each individual’s VA loan usage status. The VA may adjust the rate if one borrower has previously used a VA loan.
Is the funding fee refundable if I refinance shortly after closing?
No, once the funding fee is paid, it is not refundable. Refinancing may require a new funding fee calculation based on the type of refinance, even if you recently paid one.
How does the funding fee interact with VA loan limits?
The funding fee is added to the loan amount but does not affect VA loan entitlement limits. Your VA entitlement still determines how much of the loan is guaranteed, regardless of whether the funding fee is rolled in or paid up front.
How does the funding fee impact monthly mortgage payments?
If rolled into the loan, the funding fee increases the loan balance, which slightly raises monthly payments. Paying the fee upfront avoids this increase, though it requires out-of-pocket funds at closing.
