VA Funding Fee Explained: 2026 Rates, Exemptions & How to Avoid Paying Out of Pocket
By Ariel Carballo, Loan Officer & Sales Manager, NMLS #2097750 · Novus Texas
Quick Answer
The VA funding fee is a one-time charge, ranging from 0.5% to 3.3% of the loan amount, that most VA borrowers pay to help fund the VA loan program. The exact rate depends on whether it’s your first or subsequent use of the benefit, your down payment, and your loan type. Veterans receiving VA disability compensation at any rating of 10% or higher are exempt entirely, along with certain surviving spouses and Purple Heart recipients. Most borrowers finance the fee into their loan rather than paying it at closing.
What the VA Funding Fee Is and Why It Exists
The VA funding fee is paid directly to the Department of Veterans Affairs, not to your lender, and it is what allows the VA home loan program to operate without charging borrowers monthly private mortgage insurance. Because the VA guarantees a portion of every loan against default, the funding fee helps offset the cost of that guarantee for taxpayers, keeping the program self-sustaining for future generations of veterans.
2026 VA Funding Fee Rate Chart
These rates took effect April 7, 2023 and remain unchanged for 2026.
Purchase Loans
| Down Payment | First-Time 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% |
Refinance Loans
| Refinance Type | Funding Fee |
| VA IRRRL (Interest Rate Reduction Refinance Loan) | 0.50%, regardless of down payment or prior use |
| VA Cash-Out Refinance, first-time use | 2.15% |
| VA Cash-Out Refinance, subsequent use | 3.30% |
“Subsequent use” applies once you’ve used a VA loan for a home purchase before, even if that home has since been sold or paid off. Down payment tiers reset the fee back to first-time-use levels regardless of prior use, which is why putting even 5% down can meaningfully reduce the fee for a repeat VA borrower.
Who Is Exempt From the VA Funding Fee
- Veterans receiving VA disability compensation, at any rating of 10% or higher.
- Surviving spouses receiving Dependency and Indemnity Compensation, or DIC.
- Active-duty service members who have received the Purple Heart.
Your exemption status is confirmed on your Certificate of Eligibility before closing. If you have a pending VA disability claim at the time of closing and are later awarded a qualifying rating, you may be able to request a refund of the funding fee you already paid. We walk every Texas veteran through this process at Novus Texas, since it is one of the most commonly missed refunds in the industry.
How the Fee Is Calculated
The funding fee is calculated as a percentage of your total loan amount, not your home’s purchase price, and is typically financed into the loan rather than paid in cash. For example, a first-time VA buyer purchasing a $350,000 home with no money down would owe a funding fee of 2.15%, or $7,525. A veteran using the benefit a second time on the same purchase with no down payment would owe 3.3%, or $11,550. Putting even 5% down brings both scenarios back down to 1.5%.
Can You Roll the Funding Fee Into Your Loan?
Yes. Most VA borrowers finance the funding fee into their total loan balance instead of paying it out of pocket at closing. This raises your loan amount and your monthly payment slightly, but it also means the zero-down-payment benefit of a VA loan stays intact, since you are not required to bring the fee to the table in cash. Some veterans choose to pay the fee upfront instead, when they want to keep their loan balance as low as possible.
VA Funding Fee vs. Monthly PMI: The Real Cost Comparison
It’s easy to look at a funding fee of several thousand dollars and assume a VA loan costs more than a conventional loan. In most cases, the opposite is true over time. Conventional loans with less than 20% down typically require private mortgage insurance, charged monthly for years, sometimes the life of the loan. The VA funding fee is a one-time cost rolled into the loan rather than a recurring monthly charge, and for veterans with a qualifying disability rating, there is no funding fee at all. When you compare total cost over a five to ten year holding period, VA financing frequently comes out ahead.
A Note on the Funding Fee Tax Deduction
Starting with the 2026 tax year, VA borrowers may be able to deduct the funding fee, similar to mortgage points, if they itemize deductions. Deduction eligibility depends on your individual tax situation, so we recommend confirming details with a qualified tax professional. Keep your Closing Disclosure on file, since it documents the exact fee amount paid.
Frequently Asked Questions
How much is the VA funding fee on a $300,000 loan?
For a first-time buyer with no down payment, the fee is 2.15%, or $6,450. For a subsequent use with no down payment, it’s 3.3%, or $9,900.
Do disabled veterans pay the VA funding fee?
No. Veterans with a service-connected disability rating of 10% or higher are exempt from the funding fee entirely.
Is the VA funding fee the same as closing costs?
No. The funding fee is a separate, VA-specific charge. Standard closing costs like appraisal, title, and recording fees still apply on top of it.
Can the funding fee be waived if my disability claim is still pending?
You may need to pay it at closing, but you can typically request a refund from the VA once your qualifying disability rating is approved.
Want an exact funding fee quote for your situation? Reach a Novus Texas VA loan specialist at 469-737-5733 or InfoNow@NovusHomeMortgage.com.