What Is the VA Funding Fee?
The VA funding fee is a one-time charge on many VA-backed and VA direct home loans. It helps support the VA loan program and can vary based on the type of loan, down payment amount, whether you have used a VA loan before and whether you qualify for an exemption.
The fee is separate from ordinary VA loan closing costs. Closing costs can include appraisal fees, title fees, recording fees, prepaid interest, property tax deposits, homeowners insurance and settlement charges. The funding fee is a VA program charge.
How Financing the VA Funding Fee Works
When you finance the VA funding fee, the fee is added to your loan amount. You do not pay that fee as cash at closing, but your mortgage balance becomes larger.
For example, if your base VA loan amount is $400,000 and your funding fee is 2.15%, the fee would be $8,600. If you finance it, the total loan amount becomes $408,600 before considering any other loan terms.
| Example Item |
Amount |
| Base loan amount |
$400,000 |
| Example VA funding fee rate |
2.15% |
| Funding fee amount |
$8,600 |
| Loan amount if fee is financed |
$408,600 |
This table is for educational purposes only. Your actual funding fee depends on your loan type, down payment, first-use or subsequent-use status and exemption status.
Can You Finance the VA Funding Fee on a Purchase Loan?
Yes, the VA funding fee can usually be financed on a VA purchase loan. This can help eligible borrowers reduce the amount of cash needed at closing.
That does not mean every cost can be rolled into a VA purchase loan. Ordinary closing costs are usually paid at closing or covered through seller credits, lender credits or other allowed sources. The funding fee is the clearest VA-specific cost that can be included in the mortgage.
Can You Finance the VA Funding Fee on a Refinance?
Yes, the VA funding fee can generally be financed into a VA refinance, including an Interest Rate Reduction Refinance Loan, also called an IRRRL, or a VA cash-out refinance.
The funding fee differs by refinance type. VA.gov lists the funding fee for an IRRRL as 0.5% and says that rate does not change based on down payment or whether you have used the VA loan program before.
VA Funding Fee Rates Can Vary
The VA funding fee is not one flat percentage for every borrower. For purchase and construction loans, the rate can vary by down payment and whether it is your first use or later use of the VA loan benefit.
| Down Payment |
First Use |
After First Use |
| Less than 5% |
2.15% |
3.30% |
| 5% to 9.99% |
1.50% |
1.50% |
| 10% or more |
1.25% |
1.25% |
These purchase-loan rates apply to many VA loans closing on or after April 7, 2023, and before Nov. 14, 2031. The VA publishes the official funding fee table and exemption rules on VA.gov.
Who Does Not Have To Pay the VA Funding Fee?
Some borrowers are exempt from the VA funding fee.
VA.gov lists exemptions for borrowers receiving VA compensation for a service-connected disability, borrowers eligible to receive compensation but receiving retirement or active-duty pay instead, surviving spouses receiving Dependency and Indemnity Compensation, certain borrowers with a proposed or memorandum rating before closing and active-duty service members who provide evidence of receiving the Purple Heart before closing.
If you are exempt, the funding fee may be waived rather than financed. Your Certificate of Eligibility and lender documentation help confirm whether the exemption applies.
Pros And Cons Of Financing the VA Funding Fee
| Option |
Potential Benefit |
Trade-Off |
| Finance the funding fee |
Reduces cash needed at closing. |
Raises the loan balance and can increase total interest. |
| Pay the funding fee at closing |
Keeps the loan balance lower. |
Requires more cash upfront. |
| Funding-fee exemption |
Removes the fee if you qualify. |
Only available to eligible exempt borrowers. |
The Bottom Line
The VA funding fee can usually be financed into a VA loan. Financing the fee can reduce the amount of cash needed at closing, which is one reason VA loans can be easier to close for eligible borrowers with limited savings.
Financing the fee does not make it disappear. It increases the mortgage balance and can increase total interest over time. Before deciding, compare your cash to close, monthly payment, loan balance and long-term interest cost. Also confirm whether you qualify for a VA funding fee exemption.
Frequently Asked Questions
Can the VA Funding Fee Be Financed?
Yes. The VA says borrowers can pay the VA funding fee at closing or include it in the loan and pay it off over time.
Can the VA Funding Fee Be Rolled Into the Loan?
Yes. “Rolled into the loan” usually means the funding fee is added to the mortgage balance instead of paid in cash at closing.
Can All VA Closing Costs Be Financed?
Not usually on a purchase loan. The VA funding fee can often be financed, but standard closing costs such as appraisal, title, recording, prepaid interest, taxes and insurance are usually paid at closing or covered through credits.
Does Financing the VA Funding Fee Increase the Monthly Payment?
Yes, financing the funding fee can increase the monthly payment because it raises the loan balance. The exact payment difference depends on the fee amount, interest rate and loan term.
Is the VA Funding Fee Required?
Many VA borrowers pay the funding fee, but some borrowers are exempt. Exemptions may apply for certain borrowers with service-connected disability compensation, eligible surviving spouses and active-duty Purple Heart recipients.
Can the Seller Pay the VA Funding Fee?
The seller may be able to pay the VA funding fee as part of seller concessions, subject to VA rules and the purchase contract. The VA says sellers can pay up to 4% of the property’s reasonable value in concessions.
What Is the VA Funding Fee For an IRRRL?
The VA funding fee for an IRRRL is 0.5% unless the borrower is exempt.
What Happens If I Finance the VA Funding Fee and Refinance Later?
If you finance the funding fee, it becomes part of your loan balance. If you refinance later, that balance is paid off through the new loan or sale proceeds, depending on the transaction.
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