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.
Explore your VA home loan benefit
Use our VA Loan tool to check your eligibility, estimate your benefit, and start the process — including verifying your funding fee exemption status.
VA Loan Tool →How to Claim Your Funding Fee Exemption
Claiming your funding fee exemption is straightforward — but you need to take proactive steps to ensure your lender and VA have the correct information.
Step 1: Get Your Certificate of Eligibility (COE)
Your COE should indicate your exemption status. Obtain your COE through VA.gov, your lender's VA loan portal, or by submitting VA Form 26-1880. If you have a service-connected disability rating, the system should reflect exemption automatically.
Step 2: Provide Your VA Disability Rating Documentation
Give your lender a copy of your most recent VA rating decision letter, or your VA benefit verification letter (obtainable from VA.gov under "Download Your Benefit Letters"). The document must show:
- Your name and VA file number
- Your combined service-connected disability percentage (10% or higher)
- That you are currently receiving or entitled to receive VA compensation
Step 3: Verify Before Closing
Review your Loan Estimate and Closing Disclosure carefully. The funding fee should appear as $0 or simply not appear. If you see a funding fee listed and you believe you're exempt, contact your lender immediately — before closing, not after.
Can You Get a Refund If You Were Wrongly Charged?
Yes — in two situations, you may be entitled to a refund of funding fees already paid:
Situation 1: Exempt but Charged
If you were exempt at the time of closing (because you had a 10%+ disability rating) but were charged a funding fee due to lender or VA error, you can request a refund. Contact your VA Regional Loan Center with documentation of your disability rating and the loan closing date.
Situation 2: Rating Awarded Retroactively to Before Closing
If you paid a funding fee and later received a VA disability rating with an effective date (back pay date) that predates your loan closing, you may be eligible for a refund. This is more complex and requires working with your VA Regional Loan Center and potentially an accredited attorney.
Next Steps
- Check your VA disability rating. If you're at 10% or higher, you're exempt — confirm this before your next VA loan closes.
- Obtain your benefit verification letter at VA.gov under "Letters" to document your exemption for your lender.
- Review your COE and confirm it reflects your exemption status.
- Verify your Closing Disclosure shows $0 funding fee before signing.
- If you paid a funding fee unnecessarily (because your rating was pending or the lender made an error), contact your VA Regional Loan Center to request a refund.
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