The VA Funding Fee, Demystified
One closing cost, one time, and often financeable. Here's exactly how the funding fee is calculated in 2026.
Why the funding fee exists
The VA funding fee is a one-time payment that helps keep the VA loan program running for future generations of veterans. It replaces the ongoing monthly PMI cost that conventional and FHA borrowers pay for years.
For most borrowers, the trade is enormously in your favor: one financed fee vs. hundreds of monthly PMI payments.
2026 fee schedule
First-use purchase, no down: 2.15% (regular military) / 2.4% (Reserves/Guard). Subsequent use jumps to 3.3%.
Putting 5% down drops the fee to 1.5%. 10%+ drops it to 1.25%. IRRRL refinance: flat 0.5%. Cash-out refinance: 2.15% first use, 3.3% subsequent.
Who's exempt
Veterans receiving VA disability compensation are exempt from the funding fee entirely. Purple Heart recipients (active duty), and surviving spouses of veterans who died in service or from a service-connected disability, are also exempt.
Most borrowers who owe the fee roll it into their loan rather than pay it at closing — the impact on the monthly payment is small, and the benefit of preserving cash is meaningful.
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