VA Funding Fee 2025-26: Every Rate Explained, With Exemptions

The VA funding fee is the one cost the VA takes off the top of every loan it guarantees. It exists because the program runs without taxpayer subsidy — the funding fee is what makes that math work. For most veterans it's a percentage point or two of the loan amount. For service-connected veterans it's zero.

Here is the current schedule and the exemptions, in plain language.

The 2025-26 Funding Fee Schedule

These rates apply to loans closed under the current schedule (effective April 2023, which superseded the prior temporary higher rates):

Loan type	Down payment	First use	Subsequent use
Purchase or construction	None	2.15%	3.3%
Purchase or construction	5% to under 10%	1.5%	1.5%
Purchase or construction	10% or more	1.25%	1.25%
Cash-out refinance	n/a	2.15%	3.3%
IRRRL (Interest Rate Reduction Refinance Loan)	n/a	0.5%	0.5%
Native American Direct Loan (NADL) — purchase	n/a	1.25%	1.25%

Note: down-payment tiers apply equally to first-use and subsequent-use borrowers — putting 5%+ down brings the rate to 1.5% regardless of whether it's your first VA loan.

Who Is Exempt

The funding fee is fully waived for any of these:

• Veterans receiving VA disability compensation for any service-connected condition. This includes veterans receiving as little as 10% — the exemption is not just for severe disabilities.
• Veterans who would be entitled to compensation but for receipt of retirement pay (the offset rule). If your retired pay reduces your VA disability check to zero, you're still exempt.
• Active-duty service members awarded the Purple Heart before loan closing.
• Surviving spouses of veterans who died in service or from a service-connected disability and who are receiving Dependency and Indemnity Compensation (DIC).
• Veterans rated for individual unemployability (TDIU/IU).
• Active-duty service members who provide evidence of a pre-discharge claim that will result in compensation upon separation, with proper documentation.

If you fall in any of these categories and your lender tries to collect the funding fee, push back. They sometimes default to charging the fee and refunding it after the VA confirms exemption. You can request a waiver upfront with your COE.

How the Fee Is Paid

You have three options:

1. Roll it into the loan. Most veterans do this. The $9,675 funding fee on a $450,000 first-use loan becomes part of the financed amount, increasing your monthly P&I by about $50 at 7% over 30 years.
2. Pay at closing. Reduces your loan balance and monthly payment.
3. Seller-paid. Sellers can pay the funding fee as a concession. They're capped at 4% of the sales price for total concessions on a VA loan, and the funding fee counts toward that cap.

The financed approach is most common because the fee is small relative to the lifetime savings of $0 down + no PMI.

What the Funding Fee Replaces

On a conventional loan with less than 20% down, you'd pay private mortgage insurance (PMI) — typically 0.5% to 1.5% of the loan amount annually until you hit 20% equity. On a $450K loan, that's $187 to $562 per month for years.

VA funding fee is one-time. PMI keeps coming until you refinance or pay down the loan. Even at 3.3% (the worst-case subsequent-use no-money-down rate), it's cheaper than PMI for most borrowers within 24-36 months.

First Use vs Subsequent Use — How It's Determined

"First use" means this is your first time using your VA home loan benefit, OR you've fully restored your entitlement (paid off and disposed of the property, or had a one-time entitlement restoration).

"Subsequent use" means you have an active or previously-used VA loan in your history without full entitlement restoration. The penalty is real — 3.3% vs 2.15% — and it's why many veterans plan their VA-loan use carefully.

You can restore entitlement by paying off the prior VA loan and disposing of the property. You can also use a one-time restoration without selling the property, but only once per veteran. After that, any new VA loan with the prior loan still active triggers subsequent-use rates.

Refunds When Exemption Is Granted Late

If your VA disability rating comes through after closing and the funding fee was charged, you're entitled to a refund. The lender remits the funding fee to the VA at closing; once the VA confirms your exemption status retroactively, the refund flows back through the lender.

This happens often when veterans close on a home while a disability claim is pending. The refund is automatic but slow — sometimes 6-12 months from the rating decision. If it's been longer, contact your lender's funding fee specialist or the VA Regional Loan Center.

Special Case: Reservists and Guard

Reservists and Guard members under earlier rules paid higher funding fees than active-duty veterans. Since 2020 (the Blue Water Navy Vietnam Veterans Act), the rates have been the same. There's no longer a Reserve/Guard surcharge.

Special Case: Native American Direct Loan (NADL)

The NADL is a direct VA loan (not a guarantee) for Native American veterans buying or building on federal trust land. The funding fee is 1.25% across the board, with the same exemptions as the regular VA loan.

What If You Refinance Multiple Times?

Each VA-to-VA refinance pays a 0.5% IRRRL funding fee. There's no cap on the number of times you can IRRRL — many veterans IRRRL through multiple rate cycles in their loan's life. The 0.5% adds up at scale, so don't refinance for less than ~0.75% rate improvement unless you have a specific reason (e.g., dropping an ARM).

Try It With Live Numbers

Use the VA Funding Fee Calculator to see your fee, total fee dollars, and final loan amount with the fee financed. Toggle the exemption checkbox to see what changes.

Related

• VA Home Loan Center — eligibility, COE, IRRRL, foreclosure help
• How to Use Your VA Home Loan — full process
• BAH After Separation — the housing transition the VA loan supports