By Ryan Singer, NMLS #1520306 · October 23, 2026The funding fee is what you pay VA in exchange for no down payment and no monthly mortgage insurance. You pay it once, you can usually roll it into the loan, and a lot of my clients don't owe it at all. More than half of recent VA borrowers didn't pay it. Here's what it costs in 2026 and how to tell if you're exempt.
What you're actually paying for
VA guarantees part of every VA loan. Instead of having taxpayers pay for that guarantee, VA charges most borrowers a one-time fee. That money goes to VA, not to me or Independence. It's a big part of why VA loans don't need monthly mortgage insurance.
The fee is a percentage of your loan amount, not the price of the house. Federal law sets it, and under current law the rates below stay the same for loans that close before June 9, 2034.
2026 VA funding fee chart
These rates took effect April 7, 2023, and they still apply in 2026. They're the same whether you're a veteran, on active duty, or in the Guard or Reserve.
Purchase and construction loans
| Down payment | First use | After first use |
|---|---|---|
| Less than 5% | 2.15% | 3.3% |
| 5% to less than 10% | 1.5% | 1.5% |
| 10% or more | 1.25% | 1.25% |
Refinances and other loans
| Loan type | Funding fee |
|---|---|
| Cash-out refinance, first use | 2.15% |
| Cash-out refinance, after first use | 3.3% |
| IRRRL (streamline refinance) | 0.5% |
| Loan assumption | 0.5% |
| Manufactured home (not permanently affixed) | 1% |
Source: VA's funding fee and closing costs page. On a refinance, putting more money down doesn't lower the fee.
The real dollar amounts
- First-time buyer, $0 down, $400,000 loan: 2.15% = $8,600.
- Second VA purchase, $0 down, $400,000 loan: 3.3% = $13,200.
- Same buyer putting 5% down: 1.5% of a $380,000 loan = $5,700.
- IRRRL on a $300,000 balance: 0.5% = $1,500.
Look at that second-use buyer. Putting 5% down cuts the fee by $7,500. If you've got the cash, I'll run it both ways so you can see the difference.
Who is exempt
You don't pay the fee if any of these are true:
- You receive VA compensation for a service-connected disability.
- You're eligible for that compensation but receive retirement or active-duty pay instead.
- You're a surviving spouse receiving Dependency and Indemnity Compensation (DIC).
- You're a service member with a proposed or memorandum rating, issued before closing, saying you're eligible for compensation based on a pre-discharge claim.
- You're on active duty and provide evidence of a Purple Heart on or before your closing date.
Your Certificate of Eligibility shows whether you're exempt. If it says you owe the fee and you think it's wrong, tell me right away. If your rating gets updated before closing, that can change the answer.
Funding fee refunds
Let's say you close while your disability claim is still pending and pay the fee. Months later the rating comes through, with an effective date before your closing. You may get that fee back. This happens more often than people think. VA's regional loan centers handle refunds, and you can reach them through VA's home loan line.
There's one catch. A proposed or memorandum rating issued after your closing date doesn't get you a refund by itself.
Pay it at closing or finance it?
Most of my clients roll the fee into the loan. You keep your cash, but you pay interest on the fee for as long as you have the loan. Paying it at closing saves that interest. On a purchase, the seller can also cover it as part of their concessions, up to VA's limits. I'll lay out each option in writing and you can pick.
The fee and refinancing
On an IRRRL the fee is only 0.5%, and VA leaves it out of the 36-month recoupment test. You're still paying it, though, so I include it when I figure your break-even. On a cash-out refinance the fee is much bigger. That's one of the main reasons I steer people to the IRRRL when all they want is a lower rate. My IRRRL vs. cash-out comparison goes through it.
The full chart and exemption rules are on my VA funding fee page.
Frequently asked questions
What is the VA funding fee in 2026?
For a first-use purchase with less than 5% down it is 2.15%, and 3.3% for subsequent use. Cash-out refinances are 2.15% or 3.3%, and an IRRRL is 0.5%.
Who does not pay the VA funding fee?
Veterans receiving or eligible for service-connected disability compensation, surviving spouses receiving DIC, service members with a qualifying pre-discharge rating, and active-duty Purple Heart recipients.
Can I roll the VA funding fee into my loan?
Yes. Most borrowers finance it, though paying it at closing saves interest over time.
Can I get my VA funding fee refunded?
Possibly, if you are later awarded disability compensation with an effective date before your loan closed. Contact your VA regional loan center.
This article is general education, not financial, legal or tax advice, and it is not a commitment to lend. Program rules change; all loans are subject to credit approval, underwriting and program eligibility, and not all borrowers will qualify.