The VA funding fee: chart, examples and exemptions

The purchase loan chart

VA calculates the fee as a percentage of the total loan amount, not the purchase price. For VA-backed purchase and construction loans, under the chart effective April 7, 2023, the rates for veterans, active-duty service members and National Guard and Reserve members are:

• First use, less than 5 percent down: 2.15 percent
• First use, 5 percent or more down: 1.5 percent
• First use, 10 percent or more down: 1.25 percent
• After first use, less than 5 percent down: 3.3 percent
• After first use, 5 percent or more down: 1.5 percent
• After first use, 10 percent or more down: 1.25 percent

VA adds a note for one group: if you previously used the benefit only to buy a manufactured home, you still pay the first-time rate.

Turning the chart into dollars

VA's own example uses a $200,000 home with a $10,000 down payment: 5 percent down on first use means a fee of 1.5 percent of the $190,000 loan, or $2,850. The examples below apply the same method to a higher price.

The chart above shows those four cases. The step from under 5 percent to 5 percent down is the biggest drop, which is worth knowing if you are close to it.

Who pays nothing

VA lists the groups who do not pay the fee. You are exempt if you receive VA compensation for a service-connected disability; if you are eligible for that compensation but receive retirement or active-duty pay instead; if you receive Dependency and Indemnity Compensation as a surviving spouse; if you are a service member with a proposed or memorandum rating before the closing date saying you are eligible for compensation from a pre-discharge claim; or if you are on active duty and, on or before closing, provide evidence that you received a Purple Heart.

Your Certificate of Eligibility shows your exemption status. If you have a claim pending, tell your lender before closing.

Refunds

VA says you may be eligible for a refund if you are later awarded compensation for a service-connected disability and the effective date of that compensation is before the loan closing date. A proposed or memorandum rating received after closing does not qualify. Refunds are requested through your VA regional loan center. VA's older loan fee page notes that refunds issued since July 1, 2019, are paid directly to the veteran.

Cash or financed?

VA lets you pay the fee in full at closing or include it in the loan. On a purchase loan, it is the only cost VA allows you to finance; other closing costs must be paid at closing or covered by credits. Financing keeps cash in your pocket but means paying interest on the fee for as long as you hold the loan, and it raises the loan balance relative to the home's value. VA's own page warns that adding the fee and other costs can leave you owing more than the home is worth, which makes refinancing or selling harder.

A simple test: if paying the fee in cash would drain your emergency savings, financing it is usually the safer choice. If you have ample savings, paying it avoids years of interest.

The seller can help

VA allows sellers to pay a buyer's closing costs and limits seller concessions to 4 percent of the home's reasonable value. VA lists the funding fee as an example of a concession. In a negotiation, asking the seller to cover the fee can be worth more to you than a small price cut, because it saves cash at closing.

Use the calculator

Enter the price, your down payment, whether this is your first use, and whether you are exempt. The calculator applies VA's chart and shows the fee in dollars. Confirm the result with your lender, who will apply your COE details and the current chart.