VA Loan Funding Fee Explained: How Much You'll Pay and How to Avoid It

A VA loan's biggest selling point is that it lets eligible veterans and service members buy a home with 0% down and no monthly private mortgage insurance (PMI) — something no conventional loan offers. That benefit isn't free; it's funded by a one-time charge called the VA funding fee, paid at closing (or financed into the loan). Here's exactly how much it costs, who's exempt, and how it stacks up against paying PMI on a conventional loan. Run your own numbers with our VA loan calculator .

What the Funding Fee Is

The funding fee is set by federal statute (38 U.S.C. § 3729(b)) and paid into the VA loan program to offset the cost of loans that go into default, since the VA doesn't require a down payment or monthly mortgage insurance the way conventional lenders do. It's a one-time charge calculated as a percentage of the loan amount, not an ongoing monthly cost — that's the key structural difference from PMI, which you'll see below.

2026 Funding Fee Rates by Down Payment

The fee scales with your down payment, not your credit score, and it's higher if you've used your VA loan entitlement before:

Down Payment First Use Subsequent Use

Less than 5% down 2.15% 3.30%

5% to 9.99% down 1.50% 1.50%

10% or more down 1.25% 1.25%

Notice that once you put down at least 5%, the first-use and subsequent-use rates converge — the penalty for having used your entitlement before only applies at the lowest down-payment tier. A separate, much lower rate applies to VA Interest Rate Reduction Refinance Loans (IRRRLs, sometimes called VA Streamline Refinances): a flat 0.5% regardless of down payment or how many times you've used your entitlement before.

Who's Exempt

Several categories of borrowers pay no funding fee at all:

Veterans receiving VA disability compensation — any service-connected disability rating, even 10%, exempts you from the entire fee. There's no minimum rating threshold.

Purple Heart recipients who are currently serving and purchasing or building a home are exempt regardless of disability rating.

Surviving spouses receiving Dependency and Indemnity Compensation (DIC) are exempt. Surviving spouses who are not receiving DIC benefits are not automatically exempt.

If you believe you qualify for an exemption, your VA Certificate of Eligibility (COE) will typically reflect it — confirm your exemption status with your lender before closing, since an incorrectly charged fee can be refunded but it's simpler to get it right up front.

Why There's No PMI

On a conventional loan, putting down less than 20% typically means paying private mortgage insurance — usually somewhere around 0.5% to 1.5% of the loan balance per year — until your equity reaches 20% of the original home value (or you refinance to eliminate it). That's a recurring monthly cost that can run for years. A VA loan never charges PMI, at any down payment, because the VA guaranty on the loan replaces the function PMI would otherwise serve. The funding fee is effectively the one-time price of skipping years of monthly PMI payments, which is why VA loans can cost less overall despite the upfront fee — especially for buyers making a low or 0% down payment.

Financing the Fee vs. Paying Cash

Most borrowers roll the funding fee into the loan amount rather than paying it out of pocket at closing — the fee is added to the loan principal, which is why the total loan amount on a 0%-down VA loan ends up higher than the home's purchase price. This keeps closing costs down, but it means you finance the fee over the life of the loan and pay interest on it. If you have the cash available, paying the funding fee upfront is cheaper in total, since you avoid decades of interest on that portion of the loan. Note that the funding fee is separate from standard closing costs — the VA caps certain closing costs a lender can charge, but it doesn't eliminate them, so budget for both.

Is the Funding Fee Tax-Deductible?

The funding fee has, at various points, qualified as deductible mortgage insurance premium under federal tax law, though that deduction has lapsed and been retroactively reinstated by Congress more than once in past years. Because the rule has changed repeatedly, don't assume deductibility either way — check the current-year IRS guidance or consult a tax professional when you file for the year you paid the fee, rather than relying on what applied in a prior tax year.

How the Funding Fee Compares to DLA and PPM Reimbursements

If you're closing on a home around the same time as a PCS move, remember that entitlements like DLA and PPM reimbursement are separate from anything related to your VA loan — they don't offset the funding fee, and the funding fee isn't a PCS expense the government reimburses. For a full picture of what does get reimbursed during a move, see our 2026 PCS reimbursements guide .

Summary: VA Funding Fee Quick Reference

Detail What to Know

Less than 5% down, first use 2.15%

Less than 5% down, subsequent use 3.30%

5%–9.99% down (first or subsequent) 1.50%

10%+ down (first or subsequent) 1.25%

IRRRL / streamline refinance 0.5% flat

Disability-rated veterans Exempt, any rating 10% or higher

Purple Heart recipients (serving) Exempt regardless of disability rating

Surviving spouses receiving DIC Exempt

Can it be financed into the loan? Yes — most borrowers do, but it accrues interest over the loan term

Monthly PMI on VA loans Never charged, at any down payment

Frequently Asked Questions

How much is the VA funding fee?

It ranges from 1.25% to 3.30% of the loan amount depending on your down payment and whether it's your first time using VA loan entitlement, with less down and repeat use costing more. A separate flat 0.5% rate applies to VA streamline refinances (IRRRLs).

Who is exempt from the VA funding fee?

Veterans receiving VA disability compensation at any rating, Purple Heart recipients currently serving, and surviving spouses receiving Dependency and Indemnity Compensation (DIC) are all exempt.

Do VA loans have PMI?

No. VA loans never carry private mortgage insurance, even at 0% down, because the VA guaranty replaces that function. The funding fee is the one-time cost that makes this possible.

Can I roll the VA funding fee into my loan?

Yes, and most borrowers do — the fee is added to the loan principal rather than paid at closing. This lowers upfront costs but means you pay interest on the fee over the life of the loan.

Is the VA funding fee the same for a refinance?

No. A VA Interest Rate Reduction Refinance Loan (IRRRL) carries a flat 0.5% funding fee regardless of down payment or prior use, which is lower than the purchase-loan rates.

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