The Veterans Affairs (VA) home loan can be an advantageous mortgage option for eligible veteran borrowers. It is often known for its lack of down payment and monthly private mortgage insurance requirements, among other helpful features. Though elements of the VA loan have the potential to help keep costs lower for buyers, there are still costs to be aware of, specifically the VA funding fee.
Even though the VA funding fee is another cost to consider among many when buying a home, it still has some unique traits for buyers to make note of ahead of their home purchase. In this article, we will explain the VA funding fee, the current rates as of 2025, exemptions to paying the fee, and how it’s paid.
What Is the VA Funding Fee?
The VA funding fee was implemented to help fund the VA home loan program. It is a one-time payment per loan that’s typically paid by the eligible veteran, active-duty service member, or surviving spouse who is using the VA loan. The goal of the VA funding fee was to reduce the tax burden on United States citizens and fund the various advantages of the loan program.
2025 VA Funding Fee Rates
The VA funding fee rates vary based on the borrower’s down payment and the context of the loan. Here, we’ll explain some of those variations. In these tables, down payment and the 2025 VA funding fee are written as a percentage of the total loan amount.
The following rates apply for veterans, active-duty service members, and National Guard and Reserve members.
VA Funding Fee on First-Time Purchases or Construction Loans
| Down Payment | VA Funding Fee |
| Less than 5% | 2.15% |
| 5% or more | 1.5% |
| 10% or more | 1.25% |
VA Funding Fee on Subsequent Purchase or Construction Loans
| Down Payment | VA Funding Fee |
| Less than 5% | 3.3% |
| 5% or more | 1.5% |
| 10% or more | 1.25% |
VA Funding Fee for Cash-Out Refinances
This one differs slightly from the VA purchase and construction loans in that the fee doesn’t change based on your down payment. Rather, there are two fee variations based on how many times you’ve used your VA loan:
- 2.15% for first-time users
- 3.3% after the first use
VA Funding Fee for Interest Rate Reduction Refinance Loans (IRRRL)
This fee is the same regardless of whether you have used the VA loan before or if you pay a down payment. The VA funding fee for an IRRRL is 0.5%.
Other Loan Types
The VA funding fee is as follows for other loan types:
- 1% for home loans for manufactured homes that are not permanently affixed
- 0.5% for a VA loan assumption
- 2.25% for a vendee loan in which a VA-acquired property is purchased.
Additionally, the Native American Direct Loan (NADL) has a 1.25% VA funding fee for purchases and a 0.5% on refinances. That loan type’s funding fee is not impacted by the number of uses of your VA loan.
Who Is Exempt?
Eligible VA borrowers typically have to pay a VA funding fee on their VA home purchases, construction loans, renovation loans, or refinances. However, there are some exemptions.
Lenders will generally look at your Certificate of Eligibility (COE) for verification of your exemption eligibility. If one or more of the following things apply to you, you might be able to get an exemption from the VA funding fee:
- You’re currently receiving VA disability compensation for a condition connected to your service.
- You would be able to get VA disability compensation for a service-connected condition but are instead receiving retirement or active-duty pay.
- You’re receiving Dependency and Indemnity Compensation (DIC) as the surviving spouse of a Veteran.
- You’re a service member who, before the loan closing date, got a proposed or memorandum rating confirming your eligibility for compensation based on a pre-discharge claim.
- You’re an active-duty service member who provides proof, on or before the loan closing date, that you are a Purple Heart recipient.
Refunds After Disability Decisions
Veterans who are awarded VA compensation for a service-connected disability could potentially be able to get a refund of their VA funding fee. For this refund to apply, the effective date of the veteran’s VA compensation has to be retroactive to before their loan closing. Veterans would not be eligible for a refund if they got a proposed or memorandum rating after their closing date.
How the Fee Is Paid (Cash vs. Financed)
The VA Funding Fee is paid upon the closing of your VA loan. It can be paid all at once in a cash payment, or it can be financed into the loan, meaning it would be added to the loan, and you would pay it off over time.
While the borrower will generally pay the VA funding fee, any party is allowed to pay it. You could negotiate with your seller to cover the fee, or your family could cover it with a gift. Even the lender is technically allowed to pay the fee.
Final Thoughts
Eligible borrowers hoping to use their VA loan should plan for the VA funding fee when estimating their total costs. While some may be exempt from paying the fee, most will have to either pay for it or negotiate for someone else to cover it.
But now that you have a clearer understanding of the VA funding fee, you can count that as one less surprise waiting for you in the home buying process! For more guidance during your VA loan process, be sure to find a lender with experience in VA loans.
This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.
