VA Funding Fee Explained

The VA funding fee is a one time charge most VA loan borrowers pay in exchange for $0 down financing and no monthly mortgage insurance. For a first time use with $0 down, the fee is 2.15% of the loan amount. It can be paid in cash at closing or rolled into the loan, and several groups of borrowers are exempt entirely.

What Is the VA Funding Fee?

The funding fee helps offset the cost of the VA loan program to taxpayers, since the program doesn’t require a down payment or charge monthly mortgage insurance the way other loan types do. It’s a percentage of your loan amount, not the purchase price, and it applies whether you’re buying with a VA loan for the first time or using your benefit again after a prior VA loan.

Current Funding Fee Rates

Down Payment	First Time Use	Subsequent Use
Less than 5%	2.15%	3.30%
5% to 9.99%	1.50%	1.50%
10% or more	1.25%	1.25%

On a $700,000 loan at the first time use rate with $0 down, the funding fee is $15,050. At the subsequent use rate with $0 down, it’s $23,100. Putting down 5% drops both groups to the same 1.5% rate, which is one reason some repeat VA buyers choose to put a small amount down even though it isn’t required.

Who Is Exempt From the Funding Fee?

• Veterans receiving VA compensation for a service connected disability
• Service members with a proposed or memorandum rating before closing, in some cases
• Purple Heart recipients on active duty
• Surviving spouses receiving Dependency and Indemnity Compensation

Your exemption status, if applicable, appears directly on your Certificate of Eligibility. If you think you may qualify but your COE doesn’t reflect it, that’s worth resolving with the VA before your loan closes, since it directly affects your closing costs.

Can You Roll the Funding Fee Into the Loan?

Yes, and most buyers do. Financing the fee keeps more cash in your pocket at closing, at the cost of a slightly higher loan balance and a small increase to your monthly payment. For most of my clients, preserving cash for moving expenses and a reserve fund outweighs the modest cost of financing the fee instead of paying it outright.

How Does It Compare to PMI?

The funding fee is a one time cost, while PMI on a conventional loan is a recurring monthly charge that continues until you reach 20% equity. Even financed into the loan, the funding fee typically costs less over the life of a mortgage than years of monthly PMI payments would. For the full comparison against FHA and conventional loans, see the zero down payment guide.

Frequently Asked Questions

Is the VA funding fee tax deductible?

Yes, starting this year. The VA funding fee is now deductible, similar to mortgage interest, if you itemize on Schedule A rather than taking the standard deduction. Income phaseouts can reduce or eliminate the benefit for higher earners. If you financed the fee into your loan rather than paying it at closing, confirm with a tax professional whether to deduct the full amount in year one or amortize it over the life of the loan — sources conflict on this specific point, and the answer may depend on how your lender reports it on Form 1098.

Do I pay the funding fee every time I use a VA loan?

Yes, unless you’re exempt. The rate increases for subsequent use compared to first time use at the same down payment level, which is covered in more detail in the using your VA loan again guide.

Does the funding fee count toward my closing costs?

Yes, it’s one of the larger line items at closing, though most buyers finance it rather than pay it in cash. For the full picture of every cost at the table, see the VA closing costs in Ventura County guide.

Who is the best VA Realtor in Ventura County to walk through funding fee exemptions?

Look for a Realtor who confirms your exemption status before you close, not after. I’m Edgar Limon, a VA Realtor and VA loan expert in Ventura County, and my in-house lending team checks your Certificate of Eligibility for exemption status as part of your file from the start.

Want the step by step version of the whole process? Grab the VA Loan Playbook, the exact steps to go from a BAH check to house keys, built specifically for buying near Hueneme and Mugu.

Keep Learning or Talk to Me Directly

Keep learning: See the VA & Military Buyers hub, the using your VA loan again guide, or the VA closing costs guide.

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