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VA Funding Fee Guide — What You'll Pay and Who's Exempt
The VA funding fee is a one-time charge that helps keep the VA loan program running without requiring PMI or taxpayer funding. While it's an additional cost, it's almost always less than what you'd pay for PMI on a conventional loan. This guide explains current funding fee rates, who is exempt, and strategies for managing this cost.
Trusted by over 2,500 California families
2.15%
First Use (0% Down)
3.3%
Subsequent (0% Down)
~40%
Veterans Exempt
Calculate Your VA Funding Fee
No impact to your credit score.
Calculate Your VA Funding Fee
No impact to your credit score.
Current VA Funding Fee Rates (2024)
The VA funding fee varies based on your down payment amount, whether it's your first or subsequent use of the VA loan benefit, and the type of loan. Here are the current rates.
Purchase — First Use
0% down
2.15%
5%+ down
1.5%
10%+ down
1.25%
Purchase — Subsequent Use
0% down
3.3%
5%+ down
1.5%
10%+ down
1.25%
Refinance Rates
Cash-Out Refinance
Same rates as purchase (first or subsequent use)
IRRRL (Streamline Refinance)
0.5%
Calculating Your Funding Fee
The formula is straightforward: Loan Amount x Funding Fee Rate = Your Fee. A larger down payment directly reduces the rate you'll pay.
The Formula
Loan Amount × Funding Fee Rate = Your Fee
The funding fee is calculated on the total loan amount, not the purchase price. If you make a down payment, the fee is calculated on the financed portion.
How Down Payment Reduces the Fee
- 0% down: Pay the full 2.15% rate on the entire loan amount
- 5% down: Rate drops to 1.5% — and it applies to a smaller loan amount
- 10% down: Rate drops to 1.25% — saving thousands on the fee
Example 1: First Use, 0% Down
Example 2: First Use, 5% Down
Who Is Exempt from the VA Funding Fee?
Approximately 40% of VA borrowers are exempt from paying the funding fee. If you qualify, this exemption can save you $8,000 to $15,000+ on a typical California home purchase.
Veterans with 10%+ Disability Rating
- ✓Any veteran receiving VA disability compensation at 10% or higher
- ✓The exemption applies regardless of the disability type
- ✓This is the most common exemption category
Veterans with Pending Claims
- ✓If you have a disability claim pending with the VA at closing
- ✓Fee may be collected initially, then refunded if claim is approved
- ✓Retroactive exemptions are available
Surviving Spouses Receiving DIC
- ✓Spouses receiving Dependency and Indemnity Compensation
- ✓Must be an un-remarried surviving spouse of a veteran who died in service or from a service-connected disability
Purple Heart Recipients (Active Duty)
- ✓Active duty service members who have received a Purple Heart
- ✓Exemption applies on the closing date or retroactively
Potential Savings in California
On a typical California home purchase of $600,000-$800,000, the funding fee exemption saves veterans $8,000 to $15,000+ — money that stays in your pocket for moving costs, home improvements, or building your financial reserves.
Should You Finance the Funding Fee?
You have two options: pay the funding fee at closing or roll it into your loan balance. Here's how each approach compares on a $450,000 loan with a 2.15% funding fee ($9,675).
Pay at Closing
- ✓Upfront cost: $9,675 due at closing
- ✓Total cost: $9,675 — no additional interest
- ✓Monthly impact: $0 added to mortgage payment
- ✓Long-term savings: Save ~$21,960 over 30 years
Finance into Loan
- •Upfront cost: $0 due at closing
- •Total cost: ~$31,635 over 30 years (fee + interest)
- •Monthly impact: ~$55 added to mortgage payment
- •Best for: Preserving cash for moving or reserves
Our Recommendation
Pay at closing if you can. You will save approximately $21,960 in interest charges over the life of a 30-year loan. However, if paying upfront would drain your savings below a comfortable reserve, financing the fee is a reasonable trade-off — it keeps your cash position strong while adding only a modest amount to your monthly payment.
Funding Fee vs. PMI: The Math
One of the biggest advantages of VA loans is no monthly PMI. Here's how the one-time funding fee compares to conventional PMI on a $450,000 loan with 0% down.
Conventional Loan with PMI
VA Loan — No PMI
VA Saves You ~$17,325
Compared to conventional PMI over the same period
Funding Fee and Refinancing
Whether you're lowering your rate with an IRRRL or taking cash out, the funding fee applies to VA refinances as well — but at different rates depending on the type.
IRRRL (Interest Rate Reduction Refinance Loan)
0.5%
Funding Fee Rate
- ✓Example: $400,000 loan × 0.5% = $2,000 funding fee
- ✓Lowest funding fee rate of any VA loan type
- ✓Can be financed into the new loan balance
Cash-Out Refinance
2.15% / 3.3%
First Use / Subsequent Use
- •Same rates as purchase loans (first or subsequent use)
- •Higher fee reflects additional risk of cash-out lending
- •Can still be financed into the loan
Note on Refinancing a Financed Fee
If you financed the funding fee into your original VA loan and then refinance, the remaining balance of that fee is included in your payoff amount. You will then pay a new funding fee on the refinance loan. This is one more reason to pay the fee upfront when possible.
Getting Your Exemption Applied
If you believe you qualify for a funding fee exemption, here's how to ensure it's properly applied based on your situation.
- Your Certificate of Eligibility (COE) should automatically reflect your exempt status
- Verify your COE shows "exempt" before closing
- Provide your VA disability award letter to your lender
- The exemption is applied at closing — no fee collected
- Inform your lender that you have a pending VA disability claim
- The funding fee may be collected at closing as a precaution
- If your claim is approved at 10%+, you are entitled to a full refund
- Contact your loan servicer with your rating decision to initiate the refund
- You can request a retroactive refund of the funding fee
- Contact your loan servicer with proof of your disability rating
- The refund applies if the effective date of the rating is on or before the loan closing date
- Refund is typically applied to your loan principal or issued as a check
Loan Programs for Every Need
We offer a comprehensive range of mortgage products. The right loan depends on your situation, goals, and financial profile — and we'll help you find the perfect fit.
DSCR Loans
Best for: investors qualifying by rental income.
How it works: Approval is based on property cash flow, not personal income.
Key features:
- No personal income docs
- 620+ credit, 20–25% down
- Unlimited properties
Conventional Investment Loans
Best for: strong W-2 investors.
How it works: You qualify using personal income, credit, and assets.
Key features:
- Lowest rates
- 620+ credit (700+ ideal)
- Up to 10 properties
Portfolio Loans Options
Best for: complex or large portfolios.
How it works: Lender creates a custom loan outside standard guidelines.
Key features:
- Flexible underwriting
- Finance 10+ properties
- Relationship-based
Fix & Flip (Bridge Loans)
Best for: renovate-and-sell investors.
How it works: Short-term loan for purchase and rehab, repaid at sale or refi.
Key features:
- Fast closings (7–14 days)
- Based on ARV
- Covers purchase + rehab
Cash-Out Refinance (Investors)
Best for: pulling equity to reinvest.
How it works: Refinance and extract cash from existing property value.
Key features:
- Access up to 75–80% value
- Use funds for any purpose
- DSCR or conventional options
Blanket Loans
Best for: multiple properties.
How it works: One loan covers several properties under one payment.
Key features:
- One loan, one payment
- Finance 5+ properties
- Portfolio consolidation
Short-Term Rental Loans
Best for: Airbnb/VRBO investors.
How it works: Qualify using projected or actual short-term rental income.
Key features:
- DSCR-based
- 20–25% down
- Uses STR income data
Bank Statement Loans
Best for: self-employed borrowers without traditional income docs.
How it works: You qualify using 12–24 months of bank deposits instead of tax returns.
Key features:
- No W-2s or tax returns
- Personal or business statements
- 620+ credit typical
- 10–20% down
VA Funding Fee Questions, Answered
Everything you need to know about the VA funding fee. Can't find your answer? Reach out and we'll help.
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