The VA funding fee is different from monthly mortgage insurance. It is charged once on most VA backed purchase, construction, and refinance loans. Many borrowers finance it into the loan instead of paying it out of pocket at closing.
The exact amount depends on the loan type, your down payment, and whether you have used your VA loan benefit before. Eligible Veterans receiving service connected disability compensation, certain surviving spouses, and some active duty service members may be exempt.
How The Fee Works
For a VA purchase loan, the funding fee is calculated as a percentage of the loan amount, not the purchase price. If you make a down payment, the loan amount is lower, and the percentage may also be lower depending on the down payment tier.
For many purchase loans, first time use with less than 5% down has a lower fee than subsequent use. Larger down payments may reduce the percentage. VA refinance programs have their own fee rules.
Who May Be Exempt?
You may not have to pay the VA funding fee if you meet an exemption category, such as receiving VA compensation for a service connected disability. Some surviving spouses and certain active duty service members with qualifying Purple Heart status may also be exempt.
Your Certificate of Eligibility often shows whether you are exempt. If the exemption status looks wrong, it is worth clearing that up before closing.
Can The Fee Be Rolled Into The Loan?
Often, yes. Many VA borrowers finance the fee into the loan. That can reduce cash needed at closing, but it also increases the loan balance and can affect the monthly payment over time.
A good loan estimate should show the fee clearly. If you do not see it, ask your loan officer to walk through the numbers line by line.
Questions To Ask Your Lender
- Am I exempt from the funding fee?
- Which funding fee percentage is being used and why?
- Is the fee being paid at closing or financed into the loan?
- How does the fee change my total loan amount and monthly payment?