2026 VA Funding Fee: Complete Guide

A VA loan could be a great financing option for a veteran looking to become a homeowner. These loans often allow active and former service members to buy homes without making a down payment or paying for mortgage insurance. The VA limits how much veterans can contribute to closing costs. However, one cost that most VA borrowers can’t avoid is the VA funding fee. This is a one-time fee for VA loan borrowers that must be paid before a veteran can close on a home.

If you have questions about how a home purchase affects your financial plan, speak with a financial advisor today.

What Is the VA Funding Fee?

A VA loan includes a fee, the VA funding fee, that applies to most borrowers. This fee gets sent directly to the Department of Veterans Affairs.

Funding fees help the VA cover lenders’ losses. If a borrower defaults, the VA can step in and pay off a portion of the loan. The fees also provide the VA with funding to cover other costs, while helping to ensure the VA can help future borrowers purchase homes.

There’s more than one way to pay the VA funding fee. You can pay it upfront in cash or roll it into your loan to pay it off over time. Just note that adding the fee to your loan balance will increase your monthly payments.

How Much Does the VA Funding Fee Cost?

The cost of your funding fees depends on a few factors, including your military status. While VA loans usually don’t require a down payment, putting a small percentage down can reduce the cost of your funding fee. The VA will also look at whether you’ve had a VA loan or refinanced in the past.

The VA funding fee is expressed as a percentage of the loan amount. For regular military borrowers with no down payment, the funding fee is 2.15%. The fee increases to 3.3% for borrowers with previous VA loans. For those with a down payment of 5% to 9%, the funding fee is 1.5%. Any loans with a down payment of 10% or higher will include a 1.25% funding fee.

VA Funding Fee Rates for Purchase & Construction Loans

Down Payment	Fee % (First-Time Use)	Fee % (Each Subsequent Use)
No down payment	2.15%	3.3%
5% – 9.99%	1.5%	1.5%
10% and up	1.25%	1.25%

VA loan refinances also require a funding fee. With a first-time VA cash-out refinance, however, regular military borrowers pay a funding fee of 2.3%.

VA Funding Fee Exceptions

Most VA borrowers will have to pay the funding fee.

However, an exemption may apply to borrowers with service-related disabilities. This means that you may not have to pay the fee if you’re receiving VA disability or you’re eligible for VA disability. This applies even if you’ve been called into active duty or you’re receiving retirement benefits instead. You may also qualify for exemption if you are the spouse of a veteran who died as a result of an incident or service-related disability.

Keep in mind that exemption from paying the funding fee is not automatic. You must apply for it and provide certain paperwork.

Certificate of Eligibility (proving you’re an unmarried surviving spouse)
Signed VA Form 26-8937
An original copy of the VA notification of disability rating, with documentation of the retirement income received for service.

After you apply, the VA will decide whether you qualify for an exemption.

How the VA Funding Fee Affects Your Total Loan Cost Over Time

The VA funding fee increases the size of the mortgage if rolled into the loan balance.

Financing the fee raises the principal amount, which in turn increases monthly payments and total interest paid over the life of the loan. Even a modest percentage increase can translate into a meaningful dollar difference over a long repayment period.

Paying the funding fee upfront avoids interest on that amount but requires additional cash at closing. This trade-off affects liquidity and should be weighed against other upfront costs, such as reserves, repairs or moving expenses. Borrowers with limited cash may prefer financing the fee, while those with sufficient liquidity may reduce long-term costs by paying it at closing.

Including the funding fee in the loan also affects the loan-to-value ratio. A higher effective loan balance can influence refinancing options later, particularly if home values decline or equity grows more slowly than expected. This may limit flexibility if the borrower wants to refinance or sell in the future.

Over time, the impact of the funding fee depends on the loan term, interest rate and how long the borrower keeps the mortgage. Borrowers who expect to move or refinance within a few years may experience a different cost outcome than those planning to hold the loan long term.

Evaluating the funding fee as part of total borrowing costs rather than as a standalone expense helps you see its financial impact more clearly.

Bottom Line

Unless you receive an exemption, you must pay a VA funding fee when you take out a VA loan. This fee can make home ownership a bit more expensive for veterans and active-duty service members. However, the VA needs the funds to ensure it can help future veterans purchase homes.

Tips for Your Mortgage and Home Search

Before you delve too deep into your home search, make sure you have an accurate representation of what you can really afford. This involves taking into account more than just your mortgage payments, but also closing costs, insurance and more. If this calculation seems a bit too complicated to do on your own, try the home affordability calculator from SmartAsset.
Buying a home is one of the largest purchases you’ll ever make, so fitting it into your financial life could be difficult. A financial advisor can help with this. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.