The VA home loan program offers some of the best mortgage terms available to American homebuyers — no down payment, no PMI, and competitive interest rates. But there's one cost most VA borrowers pay: the VA funding fee. In 2026, this fee ranges from 1.25% to 3.30% of the loan amount — meaning on a $400,000 home, you could owe $5,000 to $13,200 at closing.
The good news: if you have a service-connected VA disability rating of 10% or higher, you are completely exempt from the funding fee. Many veterans — and even some lenders — don't know this, resulting in thousands of dollars paid unnecessarily.
VA funding fee requirements and exemptions are governed by 38 USC § 3729 — Loan Fee and detailed in the VA Lenders Handbook (VA Pamphlet 26-7).
What Is the VA Funding Fee?
The VA funding fee is a one-time upfront fee paid to the Department of Veterans Affairs at closing on a VA-guaranteed home loan. Unlike private mortgage insurance (PMI) — which protects the lender and is paid monthly — the funding fee is paid once and goes directly to VA to help fund the home loan program for future veterans.
The funding fee can be:
- Paid at closing as a lump sum
- Rolled into the loan (financed), which increases your loan balance and monthly payment
Rolling the fee into the loan is common because it avoids a large upfront cash payment — but it means you'll pay interest on the fee amount over the life of the loan, making it more expensive overall.
2026 VA Funding Fee Rates
Funding fee rates depend on three factors: (1) whether it's your first or subsequent VA loan use, (2) whether you're purchasing or refinancing, and (3) your down payment amount.
Purchase Loans — Regular Military (Active Duty, Veterans)
| Down Payment | First Use | Subsequent Use |
|---|---|---|
| None (0%) | 2.15% | 3.30% |
| 5% or more | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
Purchase Loans — National Guard and Reserve
| Down Payment | First Use | Subsequent Use |
|---|---|---|
| None (0%) | 2.40% | 3.30% |
| 5% or more | 1.75% | 1.75% |
| 10% or more | 1.50% | 1.50% |
Refinance Loans
| Loan Type | Funding Fee |
|---|---|
| IRRRL (Streamline Refinance) | 0.50% |
| Cash-Out Refinance (First Use) | 2.15% |
| Cash-Out Refinance (Subsequent Use) | 3.30% |
- First use, no down payment: $400,000 × 2.15% = $8,600
- Subsequent use, no down payment: $400,000 × 3.30% = $13,200
- With 10% down, first use: $400,000 × 1.25% = $5,000
- Exempt veteran (10%+ disability): $0
Who Is Exempt From the VA Funding Fee?
Under 38 USC § 3729(c), the following borrowers are completely exempt from the VA funding fee:
1. Veterans with Service-Connected Disability Ratings of 10% or Higher
If you have a VA disability rating of 10% or more for a service-connected condition — regardless of which condition or how many — you pay zero funding fee. This is the most common exemption and applies to hundreds of thousands of veterans each year.
The rating must be in place at the time of loan closing. If you have a pending claim but haven't been rated yet, the exemption generally does not apply until the rating is official — though retroactive refunds are available in some circumstances (see below).
2. Veterans Receiving VA Compensation for Service-Connected Disability
This is effectively the same as the 10%+ rating exemption above — if you're actively receiving VA disability compensation, you're exempt.
3. Surviving Spouses of Veterans Who Died in Service or from Service-Connected Conditions
Surviving spouses receiving Dependency and Indemnity Compensation (DIC) are exempt from the funding fee. This includes surviving spouses of:
- Veterans who died in the line of duty
- Veterans who died from a service-connected disability
- Veterans who were rated 100% disabled and died (even if death was not service-connected)
4. Active Duty Service Members Who Received a Purple Heart
Purple Heart recipients using their VA loan benefit while on active duty are exempt from the funding fee on purchase loans.
5. Veterans with a Proposed or Memorandum Rating of 10%+
In some cases, a proposed rating letter (before the final decision) may be sufficient to establish exemption, particularly when the disability was incurred in the line of duty. Consult your lender and VA Regional Loan Center for guidance in this situation.
How Much Can the Exemption Save You?
The savings from the funding fee exemption depend on your loan amount and whether it's a first or subsequent VA loan use:
| Loan Amount | Funding Fee (First Use, 0% Down) | Your Savings as Exempt Veteran |
|---|---|---|
| $250,000 | $5,375 | $5,375 |
| $350,000 | $7,525 | $7,525 |
| $450,000 | $9,675 | $9,675 |
| $600,000 | $12,900 | $12,900 |
| $750,000 | $16,125 | $16,125 |
Financed into the loan, the true cost is even higher — a $9,675 funding fee rolled into a 30-year loan at 6.5% interest adds approximately $6,900 in additional interest over the life of the loan. The total value of the exemption on a $450,000 loan approaches $16,575.
Editorial Standards: This article was written by Marcus J. Webb, a veterans benefits researcher who has studied 38 CFR Part 4, the VA M21-1 Adjudication Manual, and thousands of BVA decisions. Content is verified against current 38 CFR regulations and VA.gov guidance. Last reviewed: April 2026. Not legal advice — for representation on your specific claim, talk to a VA-accredited attorney.
Official Sources & References
Ready to Start Your VA Disability Claim?
Free, guided, step by step — takes about 3 minutes.
Start My VA Claim →