VA Funding Fee: Requirements for 2024
Military borrowers typically pay a VA funding fee to help offset what taxpayers contribute toward home loans backed by the U.S. Department of Veterans Affairs (VA). There are ways to reduce the amount you’ll pay, however, and veterans with a service-related disability may not have to pay it at all. That said, if you’re subject to this fee, here’s how to determine what you’ll owe.
What is the VA funding fee?
The VA funding fee is an upfront cost that military borrowers pay to the U.S. Department of Veterans Affairs (VA) when they close on a VA loan. Since the VA home loan program doesn’t require a down payment or mortgage insurance, the funding fee helps defray some costs of guaranteeing the loan in the event that a borrower defaults on their mortgage.
The VA funding fee is calculated as a percentage of your total loan amount and can range from 0.5% to 3.3% However, it varies based on a few factors, including:
- Your down payment amount
- Your loan purpose (buying, building, tapping home equity or reducing your interest rate)
- The number of times you’ve used your VA home loan benefits (first time versus repeat use)
Learn more about whether you need a VA down payment.
How much is the VA funding fee?
Congress adjusts funding fee rates when the cost of running the program changes. The rates below are effective as of April 7, 2023 (reviewed and confirmed in July 2024):
VA funding fee for purchase and construction loans
On purchase and construction loans, veterans taking out a VA loan for the first time will receive a better rate than repeat or subsequent users of the benefit. However, you can also lower your rate by making a larger down payment.
| Loan type | Down payment | First-time user | Repeat user |
|---|---|---|---|
| Purchase and construction loans | Less than 5% 5% or more 10% or more | 2.15% 1.50% 1.25% | 3.30% 1.50% 1.25% |
Compare today’s VA loan rates.
VA funding fee for refinance loans
The VA offers two different types of refinance products: the VA interest rate reduction refinance loan (IRRRL), which allows you to secure a lower interest rate or change your loan repayment term, and the VA cash-out refinance, which allows you to borrow from the equity you’ve built in your home.
Since the IRRRL is designed to help make your housing payment more affordable, you’ll catch a break on the funding fee. That’s not the case if you’re interested in doing a cash-out refinance, though.
| Loan type | First-time user | Repeat user |
|---|---|---|
| VA cash-out refinance | 2.15% | 3.30% |
| IRRRL | 0.50% | 0.50% |
Compare today’s refinance mortgage rates.
VA funding fee for other loan types
The VA also offers loans for less common lending scenarios, which include buying a manufactured home or assuming a home loan. Here’s what some of those fees will look like:
| Loan type | First-time user | Repeat user |
|---|---|---|
| Native American Direct Loan (NADL) | 1.25% | 0.50% |
| Manufactured home loans | 1.00% | 1.00% |
| VA loan assumptions | 0.50% | 0.50% |
| Purchasing a VA-acquired property | 2.25% | 2.25% |
VA funding fee exemptions
Not every military borrower is required to pay the fee. There are a few funding fee exemptions available, according to the VA, including:
- If you’re receiving compensation for a service-related disability.
- If you’re eligible to earn pay for a service-related disability, but you’re receiving retirement or active-duty pay instead.
- If you’re an active-duty service member who, on or before the closing date, can document that you’ve received the Purple Heart.
- If you’re a service member with a “proposed or memorandum rating” (received before the closing date) that establishes compensation eligibility because of a pre-discharge claim.
- If you’re the surviving spouse of a veteran who died in the line of duty, from a service-related disability or who was completely disabled — and you’re receiving Dependency and Indemnity Compensation.
VA exemption process
The first step to be exempt from the VA funding fee is to fill out the Verification of VA Benefits Form to confirm any VA benefits that you receive. If your claim case is in progress while you’re in the process of buying a home, you’ll likely need to pay the VA funding fee upfront and apply for a refund after the case has been closed in your favor.
However, if your claim case is closed before you buy the home, your exemption status will likely be listed on your certificate of eligibility (COE) and your lender may just use that to remove the funding fee from your loan’s closing costs.
How do I pay the VA funding fee?
If you aren’t exempt from the funding fee, you’ll follow these three steps to pay it at closing:
- Determine your funding fee amount. The best place to start when trying to determine the amount you’ll owe is with your COE. There are usually two references to the funding fee on your COE. The first tells you whether you’re being charged a first-time or repeat-user fee. The second tells you whether you’re exempt from paying the fee for any reason.
- Do the math. Once you have that information, match up the loan type with your status in the charts above. For example, if you’re buying a house with no down payment and are a first-time user, your funding fee is 2.15% of your loan amount. A $300,000 home loan would have a $6,450 funding fee ($300,000 x 0.0215 = $6,450).
- Decide how you want to pay the fee. In most cases, the funding fee is rolled into your loan amount and financed over the life of the loan. However, you can also cover it out of pocket at closing or negotiate with the seller to cover it.
Use a VA loan calculator to estimate how much your VA funding fee could be.What other VA loan closing costs do I pay?
Aside from the funding fee, you’ll pay additional VA closing costs, including a credit report fee, origination fee, VA appraisal fee and title insurance. Total lender fees for VA loans are capped at 1% of your loan amount, plus reasonable discount points.
There are non-allowable fees that can’t be charged to a VA borrower, however, including real estate commissions, brokerage fees and termite report charges.