The VA funding fee is a one-time charge on most VA loans, set as a percentage of the loan amount. In 2026, it runs from 0.5% on a streamline refinance to 3.3% on a subsequent-use purchase with nothing down. Three things set your exact number: whether this is your first VA loan, how much you put down, and the loan type. And a meaningful share of veterans owe no fee at all — or are owed a refund they never claimed. The full chart, the exemption rules, and the refund most veterans miss are below.
The JD.Mortgage Team at Paramount Residential Mortgage Group has structured VA financing for 25+ years, including the files other lenders turn away. Lending in 49 states. New York excluded.
Takes about 2 minutes. No SSN and no credit pull to get started.
The 2026 VA Funding Fee Chart
Purchase and construction loans, by down payment:
Other loan types: an Interest Rate Reduction Refinance Loan (streamline) is 0.5% regardless of prior use. A cash-out refinance follows the purchase chart — 2.15% first use, 3.3% subsequent. A loan assumption carries a 0.5% fee. Manufactured homes and other niche transactions have their own schedules — that is file-level detail we confirm before you commit to anything.
Read the chart sideways, not down. The subsequent-use penalty — 3.3% versus 2.15% — only exists at less than 5% down. Put 5% down on your second VA loan and you pay exactly what a first-time user pays. On a $400,000 loan, that down payment decision moves the fee from $13,200 to $6,000. Nobody shows veterans that math. We just did.
Who Pays Nothing: The Exemption Rules
Exemption is set by the VA, not the lender — no lender can waive the fee for a non-exempt borrower, and no lender can charge it to an exempt one. You are exempt if any of these apply:
You receive VA disability compensation.
Any compensation for a service-connected condition — there is no minimum rating percentage. A 10% rating exempts you the same as a 100% rating.
You are eligible for compensation but collect other pay instead.
Veterans entitled to compensation who receive retirement pay or active-duty pay in its place are still exempt. This one gets missed on real files.
You are an active-duty Purple Heart recipient.
Exempt while serving on active duty, with documentation in the file at closing.
You are an eligible surviving spouse.
Surviving spouses using VA loan benefits are exempt from the funding fee.
The Refund Most Veterans Miss
Here is the rule almost nobody explains. If you closed your loan while a disability claim was pending, and the VA later grants compensation with an effective date on or before your closing date, you were exempt all along — and you are owed the entire fee back. On a no-down first-use $400,000 loan, that is an $8,600 refund.
The refund does not always happen automatically. If you think this applies to you, contact your loan servicer or the VA regional loan center and request a funding fee refund review. If the fee was financed into the loan, the refund can be applied against your principal balance.
Buying with a claim pending? Tell your lender before closing. The timing of your claim, your closing date, and the effective date of a future rating decision determine whether you pay the fee, skip it, or get it back later. That is exactly the kind of structuring detail that should be planned, not discovered.
Finance It, Pay It, or Make the Seller Pay It
You have three ways to handle the fee, and the right one depends on your cash position and how long you will keep the loan:
Finance it into the loan. The most common choice — no cash due at closing, and the fee rides on top of the loan amount. The trade: you pay interest on it for the life of the loan. Partial financing is also allowed.
Pay it in cash at closing. Keeps the loan balance clean and avoids interest on the fee. Makes the most sense when you plan to hold the loan long-term and have reserves to spare.
Negotiate it into the contract. The seller can pay the funding fee, and it does not count against the VA’s 4% cap on seller concessions. In a market where sellers are negotiating, this is real money left on the table by buyers who never ask.
On taxes: the funding fee is treated as a form of mortgage insurance, and deductibility has shifted with tax law over the years. Confirm the current-year treatment with your tax professional — do not assume either way.
Why the Fee Exists At All
The funding fee is what makes the rest of the program possible. It offsets the cost of loans that default, which is how the VA can guarantee mortgages with no down payment and no monthly mortgage insurance. Compare that against a conventional loan, where less than 20% down means PMI every month for years. The funding fee is one charge, once — PMI is a subscription. For most veterans the math is not close, and for exempt veterans it is not even a question.
VA Funding Fee: Common Questions
How is the VA funding fee calculated?
The fee is a percentage of your loan amount, set by three things: whether this is your first VA loan or a subsequent use, your down payment, and the loan type. In 2026, a first-use purchase with no down payment is 2.15%. Put 5% down and it drops to 1.5%. Put 10% or more down and it drops to 1.25%.
Can the VA funding fee be waived?
The fee is not waived by lenders — exemption is set by the VA. You are exempt if you receive VA disability compensation for a service-connected condition, are eligible to receive it but collect retirement or active-duty pay instead, are an active-duty Purple Heart recipient, or are an eligible surviving spouse. No lender can waive the fee for a non-exempt borrower.
Can the VA funding fee be refunded?
Yes — and this is the one most veterans miss. If you had a disability claim pending at closing and the VA later grants compensation with an effective date before your closing date, you are owed a refund of the full fee. Refunds go through your loan servicer or the VA regional loan center, and if the fee was financed, the refund can be applied to your principal.
Can the VA funding fee be financed into my mortgage?
Yes. Most borrowers roll the fee into the loan amount, which means no cash due at closing but interest paid on the fee over the life of the loan. You can also pay it in cash at closing, or the seller can pay it as part of seller concessions. Partial financing is allowed too.
Can the seller pay the VA funding fee?
Yes. The funding fee can be paid by the seller and it does not count against the VA’s 4% cap on seller concessions. In a buyer-leaning market, asking the seller to cover the funding fee is a legitimate negotiation strategy.
How much is the VA funding fee for second-time use?
Subsequent use with no down payment is 3.3% in 2026 — the largest jump in the whole chart. But the subsequent-use penalty disappears with a down payment: 5% down brings it to 1.5% and 10% down brings it to 1.25%, identical to first use. If you have the cash, a small down payment on a second VA loan saves real money.
Is the VA funding fee tax deductible?
The funding fee is treated as a form of mortgage insurance for tax purposes, and deductibility has changed over the years based on tax law. Whether you can deduct it depends on the tax year and your income — confirm with your tax professional before claiming it.
What is the VA funding fee used for?
It funds the VA loan program itself. The fee offsets the cost of loans that default, which is what lets the VA guarantee loans with no down payment and no monthly mortgage insurance. It is why the program can exist without charging PMI.
Related Pages
Written by J.D. Peck — Area Manager and Mortgage Loan Originator with 25+ years of experience and 3,100+ closed loans, specializing in VA lending, self-employed financing, and strategic loan structuring. Scotsman Guide Top Originator 2026.
J.D. Peck NMLS #314883 | PRMG NMLS #75243 | Funding fee figures per VA schedule in effect for 2026 and subject to change by the VA. Lending in 49 states. New York excluded.
Takes about 2 minutes. No SSN and no credit pull to get started.