VA Funding Fee: Who Pays & Who's Exempt
October 21, 2026
The VA funding fee is a one-time charge paid to the Department of Veterans Affairs on most VA-backed home loans to help keep the program running for future borrowers. The amount depends on the loan type, whether it's your first use of the benefit, and, for purchases, the size of your down payment. Veterans who receive VA disability compensation, and certain others, are exempt, and your Certificate of Eligibility shows your exemption status.
How the fee works. VA publishes the funding fee chart on va.gov, with separate rates for purchase and construction loans, cash-out refinances, Interest Rate Reduction Refinance Loans (IRRRLs), and loan assumptions. The fee is generally higher for subsequent use of the benefit than for first use, and a larger down payment generally lowers the fee on a purchase. An IRRRL carries a smaller fee than a purchase or cash-out refinance. You can pay the fee at closing or finance it into the loan, and in some cases a seller or lender credit can help cover it. On your Loan Estimate and Closing Disclosure, it appears with the loan costs. VA loans don't require monthly mortgage insurance, and the funding fee is part of how the program works without it.
Who's exempt. You generally don't pay the funding fee if you receive VA compensation for a service-connected disability, if you're eligible for that compensation but receive retirement or active-duty pay instead, if you're a surviving spouse receiving Dependency and Indemnity Compensation (DIC), or if you're an active-duty service member who received the Purple Heart and provide proof before closing. If you've filed a disability claim and are awarded compensation with an effective date before your closing, you may be eligible for a refund of the fee, so contact VA. Your Certificate of Eligibility shows whether you're exempt. If it doesn't match what you expect, sort it out with VA before closing rather than relying on a lender's estimate.
What to check and quick answers. Ask the lender: Which funding fee category applies to me, first use or subsequent use? Is the fee being financed or paid at closing? Does my COE show an exemption? If my disability claim is pending, what happens if it's approved after closing? Review the fee line on your Loan Estimate and compare it with VA's current chart on va.gov. Is the funding fee refundable? Only in specific cases, such as a retroactive disability award, so contact VA. Does financing the fee raise my loan amount? Yes, and you'll pay interest on it over time. Is the funding fee tax-deductible? Ask a tax professional. Our VA eligibility post at lofirate.com/blog/va-loan-eligibility-who-qualifies-coe-2026-10-20 covers getting your COE.
The VA funding fee is a one-time charge that varies by loan type, prior use and down payment, and it can be financed. Many veterans with service-connected disabilities and certain surviving spouses and Purple Heart recipients are exempt. Check your COE and VA's current chart before closing. Sources: VA, VA funding fee and loan closing costs (va.gov); 38 U.S.C. 3729. LoFi Rate is not affiliated with or endorsed by the U.S. Department of Veterans Affairs. General education only. LoFi Rate is an independent matching service, not a lender or mortgage broker. If you request a match, your information is shared with independent mortgage professionals licensed in your state.