What the VA funding fee is and why it exists
The VA funding fee is a one-time payment required on many VA-backed and VA direct home loans. Your lender collects the fee as part of the loan transaction and remits it to the Department of Veterans Affairs. It is separate from lender fees and other standard closing costs.
The funding fee helps offset the cost of the VA home loan program to taxpayers. VA loans generally do not require a down payment or monthly mortgage insurance, and the funding fee helps support the program.
Many Veterans, active-duty service members, National Guard and Reserve members, and eligible surviving spouses pay a funding fee when using a VA loan unless they qualify for an exemption. Funding fee rates are established by federal law and VA guidelines, not by CrossCountry Mortgage or individual mortgage lenders.
How much the VA funding fee costs in 2026
The VA funding fee is generally calculated as a percentage of the loan amount before the funding fee is added.
The funding fee rates effective since April 7, 2023, remain in effect in 2026. The amount you pay can vary based on the type of VA loan, whether you have previously used the VA home loan benefit and, for purchase and construction loans, the amount of your down payment.
Current VA funding fee rates
| Loan type | First use | Subsequent use | 5%–9.99% down | 10%+ down |
|---|---|---|---|---|
| Purchase/construction, less than 5% down | 2.15% | 3.30% | — | — |
| Purchase/construction, 5%–9.99% down | — | — | 1.50% | — |
| Purchase/construction, 10%+ down | — | — | — | 1.25% |
| Cash-out refinance | 2.15% | 3.30% | N/A | N/A |
| IRRRL (streamline refinance) | 0.50% | 0.50% | N/A | N/A |
| Manufactured home loan, not permanently affixed | 1.00% | 1.00% | N/A | N/A |
| Loan assumption | 0.50% | 0.50% | N/A | N/A |
| Native American Direct Loan — purchase | 1.25% | 1.25% | N/A | N/A |
| Native American Direct Loan — refinance | 0.50% | 0.50% | N/A | N/A |
| Vendee loan | 2.25% | 2.25% | N/A | N/A |
For VA-backed purchase and construction loans, a down payment of at least 5% reduces the funding fee to 1.50%. A down payment of at least 10% reduces it to 1.25%. Those reduced rates apply regardless of whether it’s the borrower’s first or subsequent use of the VA home loan benefit.
VA funding fee by loan type
The type of VA loan you’re using is one of the main factors that determines your funding fee. Purchase loans, cash-out refinances, VA streamline refinances and certain other VA transactions have different fee structures.
The following examples are illustrative only and do not represent actual CrossCountry Mortgage loan terms, interest rates, costs or available credit.
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Funding fees for VA purchase and construction loans
VA-backed purchase and construction loans use a funding fee schedule based on prior use of the VA home loan benefit and the borrower’s down payment.
Example: On a $300,000 first-use VA purchase loan with no down payment, a 2.15% funding fee would equal $6,450. If the borrower finances the funding fee, the resulting loan balance would be $306,450.
If the borrower instead makes a 10% down payment, the base loan amount would be $270,000. At the 1.25% funding fee rate, the funding fee would equal $3,375.
These examples illustrate how the funding fee and loan amount can change with different down payment scenarios. Actual costs and loan terms will depend on the individual transaction.
Current VA funding fee rates for purchase and construction loans are the same for eligible Veterans, active-duty service members, and National Guard and Reserve members.
Whether it makes sense to use savings for a down payment or maintain additional cash reserves depends on your financial circumstances and goals. A CrossCountry Mortgage loan officer can help you compare potential scenarios.
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Funding fees for VA cash-out refinance loans
A VA cash-out refinance replaces an existing mortgage with a new VA-backed loan and may allow an eligible borrower to access home equity.
The current VA funding fee for a cash-out refinance is 2.15% for first use and 3.30% for subsequent use. Unlike VA purchase loans, the cash-out refinance funding fee does not decrease based on a down payment amount.
Example: On a $300,000 VA cash-out refinance subject to a 3.30% funding fee, the funding fee would equal $9,900. If the funding fee were financed, the resulting loan balance would be $309,900.
Depending on a borrower’s circumstances and goals, other financing options may also be worth considering. A CrossCountry Mortgage loan officer can help compare available refinance and home equity options.
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Funding fees for VA streamline refinances and other transactions
An Interest Rate Reduction Refinance Loan (IRRRL), commonly called a VA streamline refinance, can allow eligible borrowers with an existing VA loan to refinance under VA requirements.
The VA funding fee for an IRRRL is 0.50%.
Example: On a $250,000 IRRRL, a 0.50% funding fee would equal $1,250.
VA loan assumptions also carry a 0.50% funding fee. Certain manufactured home loans involving homes that aren’t permanently affixed have a 1.00% funding fee.
Native American Direct Loans have separate rates: 1.25% for purchases and 0.50% for refinances. Vendee loans used to purchase VA-acquired properties currently have a 2.25% funding fee.
Who pays the VA funding fee and who is exempt
Borrowers using VA-backed or VA direct home loans generally pay the VA funding fee unless they qualify for an exemption under VA rules.
Lenders collect the applicable funding fee and remit it to the Department of Veterans Affairs. A lender does not independently determine or waive the fee.
Funding fee exemption status is typically verified as part of the VA loan process. Borrowers who believe they qualify for an exemption should work with their lender to verify their status before closing.
VA funding fee exemptions in 2026
According to the Department of Veterans Affairs, you generally do not have to pay the VA funding fee if one of the following applies:
- You receive VA compensation for a service-connected disability
- You’re eligible to receive VA compensation for a service-connected disability but receive retirement or active-duty pay instead
- You’re an eligible surviving spouse receiving Dependency and Indemnity Compensation (DIC)
- You’re a service member who received a proposed or memorandum rating before closing stating that you’re eligible for compensation because of a pre-discharge claim
- You’re serving on active duty and provide evidence on or before closing that you received a Purple Heart
A pending disability claim by itself does not necessarily establish an exemption before closing. However, borrowers who are later awarded qualifying VA disability compensation with an effective date before their loan closing may be eligible for a refund of the funding fee.
Your lender will verify the applicable funding fee status as part of the VA loan process.
How to pay the funding fee: upfront vs. financing
Borrowers generally have two options for paying the VA funding fee:
- Pay the funding fee in full at closing. Paying the fee upfront avoids adding it to the loan balance but increases the amount of cash needed at closing.
- Finance the funding fee into the loan. Financing the fee adds it to the loan balance, allowing the borrower to pay it over time along with the mortgage.
Illustrative example: For a $400,000 first-use VA purchase loan subject to a 2.15% funding fee, the fee would equal $8,600. Financing the funding fee would result in a total loan balance of $408,600.
At an illustrative 6.5% fixed interest rate over 30 years, financing that $8,600 would increase the principal-and-interest payment by approximately $54 per month compared with financing $400,000. This example is for educational purposes only and does not represent current or available CrossCountry Mortgage interest rates or loan terms.
One important distinction applies to VA purchase and construction/permanent loans: the VA funding fee can be financed into the loan amount, but other closing costs generally cannot be added to the VA loan amount. Other allowable costs may be paid at closing or addressed through permitted credits or concessions, subject to VA requirements.
How the funding fee can affect your monthly payment
Financing a VA funding fee increases the amount borrowed, which generally increases the principal-and-interest portion of the monthly mortgage payment.
Here’s an illustrative example:
| Scenario | Loan balance | Approx. monthly P&I at 6.5%, 30 years |
|---|---|---|
| $300,000 loan, fee paid separately | $300,000 | ~$1,896 |
| $300,000 loan + 2.15% fee financed | $306,450 | ~$1,937 |
| Difference | +$6,450 |
These figures are illustrative estimates only. They do not include taxes, homeowners insurance, homeowners association fees or other potential housing costs, and they do not represent actual CrossCountry Mortgage loan terms or rates.
Because a financed funding fee becomes part of the loan balance, interest may accrue on that additional amount over the life of the loan. Borrowers can compare paying the fee upfront with financing it to understand how each option may affect their cash needed at closing, loan balance and estimated payment.
VA funding fee refunds and timing issues
A borrower’s disability compensation status may change after a VA loan closes. In certain circumstances, that can make the borrower eligible for a VA funding fee refund.
According to the VA, you may be eligible for a refund if you’re later awarded VA compensation for a service-connected disability and the effective date of that compensation is retroactive to before your loan closing date.
A proposed or memorandum rating received after closing does not, by itself, qualify a borrower for a funding fee refund.
If you believe you’re eligible for a refund, contact the appropriate VA regional loan center for guidance. The VA will determine whether you qualify and provide instructions for the refund process.
If a disability compensation claim is pending when your loan closes and an exemption cannot be verified, the applicable funding fee may still need to be collected. If the VA later awards qualifying compensation with an effective date before closing, you may then be able to request a refund.
How to potentially reduce your VA funding fee without an exemption
VA funding fee rates are established by federal law and VA guidelines and are not negotiated with an individual lender. Depending on the transaction, however, there may be ways to reduce the amount a borrower pays.
Make a larger down payment. On VA purchase and construction loans, putting at least 5% down reduces the funding fee rate to 1.50%, while putting at least 10% down reduces it to 1.25%.
For example, on a $300,000 purchase with no down payment and a first-use funding fee of 2.15%, the fee would be $6,450. A 5% down payment would result in a $285,000 base loan amount and a 1.50% funding fee of $4,275. A 10% down payment would result in a $270,000 base loan amount and a 1.25% funding fee of $3,375.
These examples are illustrative only. A larger down payment also requires more cash upfront, so borrowers should consider their broader financial circumstances.
Consider the type of refinance. An IRRRL currently carries a 0.50% funding fee, while a VA cash-out refinance carries a 2.15% first-use or 3.30% subsequent-use fee. These products serve different purposes and have different eligibility requirements, so borrowers should compare options based on their specific goals and circumstances.
Use allowable seller concessions. VA rules permit sellers or builders to provide certain concessions of up to 4% of the home’s reasonable value. Seller concessions may include payment of the buyer’s VA funding fee. VA rules treat ordinary closing-cost credits separately from the 4% seller-concession limit.
Verify exemption status before closing. Borrowers who believe they qualify for a funding fee exemption should work with their lender to make sure their status can be verified before the loan closes.
What CrossCountry Mortgage can help you do next
Understanding your VA funding fee is one part of evaluating a VA home loan. A CrossCountry Mortgage loan officer can help you understand how VA funding fee rules may apply to your individual transaction, whether you’re purchasing a home, using your VA loan benefit again or refinancing.
If you’re an eligible Veteran, active-duty service member or surviving spouse, a licensed loan officer can help you:
- Review your Certificate of Eligibility and applicable funding fee status
- Estimate your potential VA funding fee and how financing it could affect your loan balance and projected payment
- Compare eligible VA loan options with other mortgage products based on your financial situation and goals
CrossCountry Mortgage offers a range of mortgage products, allowing borrowers to compare available options and determine which may fit their individual circumstances.
Frequently asked questions about the VA funding fee
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The Department of Veterans Affairs announced that eligible borrowers can deduct VA funding fees beginning in 2026. Whether and how a deduction applies will depend on the borrower’s individual tax circumstances and applicable tax law. Consult a qualified tax professional or current IRS guidance for advice specific to your situation.
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The funding fee itself does not reduce your VA loan entitlement. VA entitlement relates to the VA’s guaranty of the loan rather than the funding fee paid as part of the transaction.
Whether a borrower is subject to a first-use or subsequent-use funding fee generally depends on prior use of the VA home loan benefit and applicable VA rules.
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Yes. VA rules allow a seller or builder to pay the buyer’s VA funding fee as an allowable seller concession. VA seller concessions are generally limited to 4% of the home’s reasonable value.
VA distinguishes seller concessions from ordinary closing-cost credits, so borrowers should work with their lender and real estate professional to structure credits and concessions in accordance with VA requirements.
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When multiple Veterans use their VA entitlement on a joint loan, funding fee calculations may depend on each borrower’s individual circumstances.
The VA applies the appropriate funding fee percentage to the portion of the loan allocated to each Veteran who uses entitlement and is not exempt from the funding fee. No funding fee is assessed on the portion allocated to a Veteran who uses entitlement but qualifies for a funding fee exemption.
Because the calculation can vary based on each borrower’s prior use and exemption status, the lender will determine the applicable funding fee as part of the VA loan process.
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Yes. Eligible borrowers can use the VA home loan benefit more than once. Depending on whether entitlement has been restored or remains tied to another VA loan, the amount of available entitlement and applicable loan requirements may vary. Prior use can also affect the VA funding fee rate for certain loan types.
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VA funding fee rates are established by federal law and can change through legislation. The current rate schedule has been effective since April 7, 2023, and remains in effect in 2026.
Borrowers planning a future VA loan should review the latest Department of Veterans Affairs funding fee guidance or speak with a licensed loan officer to confirm the rates and requirements in effect at that time.
