The VA funding fee explained: rates, examples and who is exempt
Current VA funding fee rates by down payment and first or subsequent use, worked examples on a $400,000 home, exemptions and financing the fee.
· · 2 min read
Key takeaways
- First-use purchase fees are 2.15% (under 5% down), 1.5% (5% to under 10%) and 1.25% (10% or more).
- Subsequent use with under 5% down is 3.3%; an IRRRL is 0.5%.
- Veterans receiving VA disability compensation are among those exempt.
- The fee can be paid in cash or financed into the loan.
Short answer: the VA funding fee is a one-time charge on VA-guaranteed home loans. For a first-use purchase it is 2.15% of the loan with less than 5% down, 1.5% with 5% to under 10% down, and 1.25% with 10% or more. Subsequent use with less than 5% down is 3.3%. Many veterans with service-connected disabilities pay nothing.
VA loans let eligible veterans and service members buy with no down payment and no monthly mortgage insurance. The funding fee is how the program pays for itself — and it is the number most generic calculators leave out.
What are the current VA funding fee rates?
These rates have applied since April 7, 2023, per the Department of Veterans Affairs.
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.3% |
| 5% to less than 10% | 1.5% | 1.5% |
| 10% or more | 1.25% | 1.25% |
Other VA loan types have their own rates — notably the Interest Rate Reduction Refinance Loan (IRRRL), which carries a flat 0.5%.
Worked examples on a $400,000 home
First use, no down payment
- Loan before fee: $400,000
- Fee: 2.15% × $400,000 = $8,600
- Financed loan: $408,600
First use, 5% down ($20,000)
- Loan before fee: $380,000
- Fee: 1.5% × $380,000 = $5,700
First use, 10% down ($40,000)
- Loan before fee: $360,000
- Fee: 1.25% × $360,000 = $4,500
Subsequent use, no down payment
- Fee: 3.3% × $400,000 = $13,200
Notice the fee is a percentage of the loan, so a down payment helps twice: a smaller loan and a lower rate.
Who is exempt from the VA funding fee?
According to the VA, you don’t pay the fee if, among other cases, you:
- receive VA compensation for a service-connected disability, or
- are eligible for that compensation but receive retirement or active-duty pay instead, or
- are a surviving spouse receiving Dependency and Indemnity Compensation (DIC), or
- are an active-duty service member who has received the Purple Heart (with evidence before closing).
Lenders confirm exemption through the Certificate of Eligibility. Check the VA’s official list for the complete conditions.
Should the fee be financed or paid in cash?
Most borrowers finance it. On the no-down-payment example above, financing $8,600 at 6.75% over 30 years adds roughly $56 a month. Paying it in cash avoids interest on the fee but uses savings that might be better kept as reserves. It is a cash-flow decision, and a calculator makes the trade-off visible.
What this means for VA calculators
A VA calculator that shows only principal and interest on the purchase price understates the payment and the loan amount. CalcFunnel’s VA loan calculator applies the funding fee by down payment band and first or subsequent use, using the rates above from our sourced US data pack. That lets a veteran see the realistic loan amount before speaking to a loan officer.
Put it on your VA program page and pair it with a “send me this scenario” form — see where to put a mortgage calculator.
Estimates only. Confirm eligibility and the exact fee with the VA and your lender.
Try the calculators from this guide
- VA Loan Calculator Mortgage & Home Loans
- Mortgage Calculator Mortgage & Home Loans
Sources
- U.S. Department of Veterans Affairs, VA funding fee and closing costs, rates effective 2023-04-07: www.va.gov
About CalcFunnel Editorial Desk
The CalcFunnel editorial desk is the product team behind the calculator library. We write about the maths our calculators run (and the government sources behind every statutory figure), how loan officers, real-estate agents and agencies put calculators to work on their websites, and the compliance basics that apply to lead forms in US mortgage marketing. Guides are reviewed against the same audited data pack the calculators use; when a figure changes, the guide is updated and its date changes with it. We are not a lender and nothing here is financial or legal advice.
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