VA Funding Fee

What Is the VA Funding Fee?

The VA funding fee is a one-time fee charged by the Department of Veterans Affairs on most VA loans. It helps fund the VA home loan program so it can continue to offer no down payment and no monthly mortgage insurance. The fee is a percentage of your loan amount and depends on whether you're using your VA benefit for the first time, whether you're making a down payment, and whether you're exempt.

In 34+ years of writing VA loans for Louisiana veterans, I've seen the funding fee catch borrowers off guard more often than any other closing cost. It doesn't have to. Once you understand how it's calculated — and whether you're exempt — it becomes just one line item on your loan estimate.

Funding Fee Rates — Current Schedule

The rates below are the current VA funding fee schedule, effective April 7, 2023, for VA-backed purchase and construction loans for veterans, active-duty service members, and National Guard and Reserve members.

• First-time use, less than 5% down: 2.15%
• First-time use, 5% or more down: 1.5%
• First-time use, 10% or more down: 1.25%
• Subsequent use, less than 5% down: 3.3%
• Subsequent use, 5% or more down: 1.5%
• Subsequent use, 10% or more down: 1.25%

For a VA Interest Rate Reduction Refinance Loan (IRRRL), the funding fee is 0.5%. For cash-out refinances, first use is 2.15% and subsequent use is 3.3%. For loan assumptions, the fee is 0.5%. Native American Direct Loan (NADL) rates differ. Rates come directly from VA.gov's funding fee schedule.

Putting money down can reduce the fee and your loan amount — I'll run the numbers both ways so you can see the trade-off. For how loan size interacts with your VA entitlement and buying power, see our guide on VA loan limits in Louisiana.

Who Is Exempt from the VA Funding Fee?

You do not pay the funding fee if you receive VA compensation for a service-connected disability, or if you're eligible to receive it but are receiving retirement or active-duty pay instead. Surviving spouses receiving Dependency and Indemnity Compensation (DIC) are also exempt, as are certain Purple Heart recipients. If you're exempt, your Certificate of Eligibility will typically indicate it — and that can save you thousands. I make sure every file reflects the correct exempt status so you're never overcharged.

Exemption Situations I Catch on Louisiana Files

These are the exemption cases I check for on every VA file — and they're the ones most often missed:

• Recently rated veterans. If you have a proposed or memorandum rating for a service-connected disability before your closing date, you qualify for the exemption — even if the rating hasn't been finalized in your VA account yet. Timing matters, and I make sure the documentation is in the file before closing.
• Retiring service members at Barksdale. If you're transitioning out and receiving retirement pay in lieu of disability compensation you're eligible for, the exemption still applies. I regularly catch this for retiring service members at BAFB who assumed they'd have to pay the fee.
• Purple Heart recipients on active duty. Active-duty Purple Heart recipients are exempt when they provide evidence on or before the closing date. If you're eligible and haven't documented it, we'll handle that as part of the loan file.
• Retroactive refunds. If you paid the funding fee at closing and were later awarded a disability rating retroactive to before your loan closed, you may qualify for a refund. It's worth asking the VA regional loan center.

Paying the Fee: At Closing or Rolled Into the Loan

Most borrowers roll the funding fee into the loan so they don't have to pay it out of pocket at closing. That increases your loan amount and monthly payment slightly, but it keeps cash in your pocket. You can also pay it in full at closing if you prefer. I'll show you both options — including how the choice affects your monthly payment and total interest over the life of the loan — so you can decide what works best for your goals.