VA Funding Fee

Key Topics In This Article: What Is A VA Funding Fee? | VA Funding Fee Charts | Exemptions | FAQs

The VA home loan program opens the door to homeownership for veterans, surviving spouses, and active duty service members who want to purchase a home or refinance their current mortgage. With lower rates and easier qualifications, the VA home loan program provides an opportunity to secure discounted terms from lenders who offer VA home loans.

One key aspect of the program is the VA funding fee, and most loan applicants must pay the fee if they want to get approved for a VA home loan.

What Is A VA Funding Fee?

The VA funding fee is a one-time charge a VA home loan applicant pays to the Department of Veterans Affairs. This fee is based on a percentage of the loan amount, ranging from 0.50% to 3.30%. This one-time amount helps fund the VA home loan program.

The VA funding fee helps fund the VA home loan program.

How Do You Calculate The Amount You Owe?

Here is the equation to determine the amount you owe. You multiply the amount you are borrowing by the percentage of your VA funding fee. As an example, we will use a 2.15% VA funding fee percentage and a loan amount of $400,000.¹

$400,000 x 0.0215 = $8,600

In this example, the loan applicant will owe $8,600 for the VA funding fee, which must be paid at closing. Additional details on how a VA funding fee can be paid are listed later in the article (FAQ section).

2024 VA Funding Fee Charts

Here are the VA funding fee charts for veterans looking to buy, refinance, or assume a VA home loan.²

Purchases – First-Time Use

Purchases – Subsequent Use

Refinances

Here are the VA funding fee percentage amounts for veterans looking to refinance their current mortgage into a new VA home loan.

Native American Direct Loan (NADL)

Here are the VA funding fee percentage amounts for the Native American Direct Loan (NADL) program.

Miscellaneous

Here are the additional miscellaneous VA funding fee percentage amounts.

Exemptions From Paying The Fee

Some VA home loan applicants do not have to pay the funding fee to the VA. Here is a list of exempt loan applicants.³

• If you are receiving compensation from the VA for a service-connected disability
• Veterans who are eligible for service-connected disability compensation but instead are receiving retirement
• Eligible veterans who can receive VA compensation but are not because they are on active duty
• You are the surviving spouse of a veteran, and you are receiving Dependency and Indemnity Compensation (DIC) from the VA
• Veterans who receive a pre-discharge exam or review and are rated as eligible for VA compensation
• Veterans who have received the Purple Heart

You are exempt from paying a VA funding fee if you meet one of these requirements.

Some Loan Applicants Will Receive A Refund

Should you receive a VA compensation award for a service-connected disability post-funding, you might qualify for a refund of your VA funding fee. The key part of getting a refund is that the effective date of your compensation must be before the closing date of your transaction.

If this applies to you, please contact your loan officer and the VA for further information.

VA Funding Fee FAQs

Here are the most common FAQs loan applicants have about the VA funding fee.

How Do I Pay The Funding Fee?

There are three ways you can pay the funding fee to the VA.

• Ask the seller to pay the funding fee
• Pay the entire amount upfront at closing
• Roll the funding fee into your loan amount and pay it back with each monthly mortgage payment

VA home loan applicants can receive up to a 4% seller credit to cover costs and fees. The funding fee is included in the 4% limit per the VA.

Note: We require that a seller can’t pay more than 4% of the total home loan in seller’s concessions. But this rule covers only some closing costs, including the VA funding fee. The rule doesn’t cover loan discount points.

Veterans Administration

Payment of the entire fee at closing can get costly, but it saves you money in the long run. Adding the amount you owe to your monthly payment is the most frequently used option. If you choose to roll it into your loan, please remember that you will be paying interest on that amount, and it will increase your mortgage payment.

What Disability Rating Do I Need To Get An Exemption?

You’ll need a service-connected disability rating of 10% or higher to get an exemption from paying the funding fee to the VA.⁴ The Veterans Administration established this policy exception clause, and mortgage lenders must adhere to the policy.

If you are exempt, be sure to let your loan officer know before you apply.

Is the VA Funding Fee Tax Deductible?

Sometimes it is, and sometimes it’s not. Some years, the IRS has allowed the funding fee to be a tax deduction; in other years, it has not been allowed.⁵ The best thing to do is consult with your tax professional to see if paying the fee is a tax deduction allowed for the year you are filing.

Does The Funding Fee To The VA Impact My Interest Rate?

No, the funding fee you pay to the VA does not impact your mortgage rate. This goes for both purchase and refinance transactions.

Bottom Line

The VA funding fee is a necessity for the longevity of the VA home loan program. The fee helps support the program, which provides some of the best terms in the mortgage industry. Some loan applicants will be exempt from paying the fee provided they meet one of the six requirements established by the Veterans Administration.

If you are considering a VA home loan and have questions about the VA funding fee, feel free to contact me directly at 1-800-550-5538 or use one of the “contact us” forms on my website.

Citation Sources:

1. VA Funding Fee And Loan Closing Costs – Va.gov
2. VA Funding Fee And Loan Closing Costs – Va.gov
3. VA Funding Fee And Loan Closing Costs – Va.gov
4. Service Connected Matrix – Va.gov
5. Are Closing Costs Tax-Deductible? – Forbes.com