VA Loan Funding Fee: Complete Guide and Exemptions

VA loans are an exceptional benefit for eligible service members, veterans, and their families—offering no down payment, no private mortgage insurance (PMI), and competitive interest rates. However, one cost that often catches borrowers off guard is the VA loan funding fee. In this guide, we’ll break down what the funding fee is, why it’s charged, how much it costs, and most importantly, how some borrowers may qualify for an exemption.

What Is the VA Loan Funding Fee?

The VA loan funding fee is a one-time charge applied to most VA loans. It helps keep the VA home loan program running and self-sustaining without placing a burden on taxpayers. The fee is paid directly to the Department of Veterans Affairs and can be financed into the loan amount.

Why Does the VA Funding Fee Exist?

The VA doesn’t require monthly mortgage insurance, unlike FHA or conventional loans with less than 20% down. To offset this benefit and reduce the program’s cost to taxpayers, the VA charges a funding fee.

How Much Is the VA Funding Fee?

The amount varies depending on several factors:

• Type of VA loan (purchase, refinance, IRRRL)
  
• Down payment amount
  
• Whether it’s your first or subsequent use of the VA loan
  

2025 VA Funding Fee Rates (for home purchases and construction loans):

💡 Example: On a $300,000 loan with no down payment, your funding fee could be $6,450 (2.15%).

For VA IRRRL (Interest Rate Reduction Refinance Loan):

• Flat 0.5% fee
  

For VA Cash-Out Refinance:

• First Use: 2.15%
  
• Subsequent Use: 3.3%
  

VA Loan Funding Fee Exemptions

Not every veteran or borrower has to pay the funding fee. You may be exempt if any of the following apply:

• You receive VA disability compensation for a service-connected disability
  
• You’re eligible to receive VA compensation but receive retirement or active-duty pay instead
  
• You’re a surviving spouse of a veteran who died in service or from a service-connected disability
  
• You’re a Purple Heart recipient currently serving on active duty
  

Check your VA loan eligibility with a loan expert today

How to Apply for a VA Funding Fee Exemption

If you’re eligible, the exemption should automatically be documented in your Certificate of Eligibility (COE). Your lender can help obtain this document during the loan application process.

If your exemption status is pending a VA decision, you may still have to pay the fee upfront, which can be refunded once your exemption is approved.

Tip: Save your medical and service documentation. If your exemption status isn’t finalized before closing, keep copies to request a refund later.

Can the VA Funding Fee Be Waived?

Yes—but only if you qualify under the exemption criteria above. Otherwise, you’re required to pay the funding fee either upfront or by rolling it into the loan.

Can the VA Funding Fee Be Financed?

Yes, most borrowers choose to finance the fee into their total loan amount to avoid out-of-pocket costs at closing. However, this increases the overall loan size and monthly payment.

How to Reduce the VA Funding Fee

While not everyone qualifies for a full exemption, you can reduce the fee by:

• Making a down payment of at least 5%
  
• Using your first-time VA loan benefit
  
• Avoiding multiple cash-out refinances
  

Talk to a VA loan specialist to explore your options

FAQ: VA Loan Funding Fee

Read Next

Explore more articles to enhance your VA loan knowledge:

• Conventional vs VA Loans: Which is better?
• Great Benefits in The Great Lakes State: Your Guide to VA Loans in Michigan
  

Final Thoughts

The VA funding fee is a critical part of sustaining the VA loan program. While it does add to the cost of buying a home, many borrowers can reduce or even avoid it entirely. By understanding how the fee works and whether you qualify for exemptions, you can make smarter decisions on your journey to homeownership.