The funding fee is the VA loan's one real cost: a one-time charge, set by law, that funds the loan guaranty program. It's usually rolled into the loan rather than paid in cash. The current rates have been in place since April 2023 and are locked in through 2031.
Purchase loan rates
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% – 9.99% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
Refinances: 0.50% for a streamline (IRRRL); cash-out refinances follow the first-use/subsequent-use rates above.
What that means in dollars
- $350,000, first use, $0 down: 2.15% = $7,525 — rolled in, your loan becomes $357,525.
- $350,000, second use, $0 down: 3.30% = $11,550. The subsequent-use jump is real — if you have savings, putting 5% down cuts the fee to 1.50% ($5,250) and reduces the loan.
- $500,000, first use, 10% down: 1.25% of $450,000 = $5,625.
Who pays nothing
You are exempt from the funding fee if you:
- Receive (or are eligible to receive) VA disability compensation
- Are an active-duty Purple Heart recipient
- Are a surviving spouse using the benefit through DIC eligibility
This matters at separation: if you have a pending or expected disability rating, tell your lender — fees paid can be refunded if a rating is later made effective before closing. Veterans with any rating at all (even 10%) pay no funding fee, which materially changes the VA vs. conventional math.
Should the fee scare you off?
Usually not. On a first-use, zero-down purchase it's comparable to what PMI would cost you on a conventional loan in just the first few years — and PMI recurs monthly while the funding fee is one-time. Where it deserves respect is subsequent use at 3.30% on a short tour: pairing the higher fee with only 2–3 years of equity buildup thins your margin if you must sell. Run that math before committing — see buy vs. rent.