What are VA funding fees? The one-time percentage VA charges on a VA loan in place of monthly mortgage insurance, set by down payment and by first or subsequent use, and waived for exempt veterans.
The VA funding fee is a one-time charge VA collects on a VA-guaranteed loan, and it stands in for monthly mortgage insurance. A VA loan carries no PMI and no FHA-style annual premium: the funding fee is the whole of the insurance cost, paid once. It is a percentage of the loan amount, set by the size of the down payment and by whether this is the borrower's first use of the benefit or a later one, and it is usually financed into the loan rather than written as a check at closing.
The structure matters more than any single number, because the table changes and the current one is on va.gov. As it stands, on the rates effective April 7, 2023, a first-use purchase with nothing down is 2.15 percent of the loan, 5 percent or more down is 1.5 percent, and 10 percent or more is 1.25 percent. A subsequent use with nothing down is 3.3 percent, with the same 1.5 and 1.25 percent tiers at 5 and 10 percent down. On a $400,000 first-use purchase with nothing down, 2.15 percent is $8,600, and financing it makes the loan $408,600.
A large group pays nothing. A veteran receiving VA compensation for a service-connected disability is exempt, as is one holding a proposed or memorandum rating before the closing date, a surviving spouse receiving Dependency and Indemnity Compensation, and an active-duty Purple Heart recipient with evidence in the file by closing. The exemption is not something to assume; it is confirmed on the certificate of eligibility. It also works backwards: if compensation is later awarded with an effective date before the loan closed, the fee already paid is refundable, while a rating effective after closing is not.
A worked example
A $400,000 VA purchase with nothing down, first use of the benefit: 2.15 percent of the loan is $8,600. Financed rather than paid at closing, it makes the loan $408,600 and adds about $54 a month at 6.5 percent over 30 years. A borrower exempt for a service-connected disability pays none of it and borrows the $400,000.
Run the payment on a financed fee
Questions people ask
Do you have to pay the VA funding fee up front?
No. Most borrowers finance it into the loan, which is why a zero-down VA loan often closes at more than the purchase price. Paying it in cash at closing is allowed and avoids carrying interest on it for thirty years.
Who is exempt from the VA funding fee?
Veterans receiving VA compensation for a service-connected disability, those holding a proposed or memorandum rating before closing, surviving spouses receiving Dependency and Indemnity Compensation, and active-duty Purple Heart recipients with evidence in the file by closing. The certificate of eligibility states it.