A $400,000 first-use VA purchase with zero down carries an $8,600 funding fee at 2.15%. If you finance it into a 30-year loan at 6.25%, that fee adds about $52.95 per month. Over the first five years, that is roughly $3,177 in additional payments. That is the real-world math this VA loan funding fee guide is built around: not just a percentage on paper, but what it changes in your monthly payment and your cash-to-close plan.
Duane Buziak, NMLS #1110647
I see buyers get tripped up when they hear “no down payment” and assume every VA cost disappears. The VA funding fee is different from a down payment, an appraisal charge, title costs, and prepaid taxes or insurance. It is a one-time program fee that helps support the VA loan benefit. Many eligible borrowers are exempt, and many others finance it. The smart move is to calculate it early, before you compare payment quotes.
Table of Contents
- What the VA funding fee is
- Current VA funding fee amounts
- Who may be exempt
- How the fee affects purchases and refinances
- VA refinance comparison table
- Credit, local market, and planning considerations
- Frequently asked questions
What Is the VA Loan Funding Fee?
The funding fee is a one-time charge on most VA purchase and refinance transactions. It is not a monthly mortgage insurance charge. You can pay it in cash at closing or add it to the loan balance, assuming the transaction supports financing it.
For borrowers who are not exempt, the fee is usually based on three things: whether this is your first VA use or subsequent use, whether you are making a down payment, and whether you are completing an Interest Rate Reduction Refinance Loan, also called an IRRRL. The official VA funding fee schedule changes occasionally, so verify the final number for your certificate of eligibility and transaction type before locking a plan.
VA Loan Funding Fee Guide: The Numbers That Matter
For a first-use VA purchase with less than 5% down, the standard funding fee is 2.15% of the base loan amount. On a $400,000 base loan, that is $8,600. With 5% to 9.99% down, the fee is generally 1.50%. With 10% or more down, it is generally 1.25%.
For subsequent VA use with less than 5% down, the standard fee is generally 3.30%. That is a meaningful difference. A $400,000 subsequent-use loan at 3.30% produces a $13,200 fee before any exemption applies. This is exactly why I tell veterans to run the actual scenario rather than relying on a generic online payment calculator.
An IRRRL generally carries a 0.50% funding fee. A VA cash-out refinance usually follows the purchase-style funding fee structure: 2.15% for first use or 3.30% for subsequent use when there is less than 5% equity contribution. The fee calculation must be separated from the refinance closing costs, which can include title work, recording charges, appraisal fees when required, and prepaid items.
Who May Be Exempt From the Fee?
Borrowers receiving VA disability compensation are commonly exempt. Certain surviving spouses and active-duty borrowers with an approved pending disability claim may also qualify. Do not assume an exemption based on verbal guidance alone. Your certificate of eligibility and VA status determine the result, and a late exemption can change the final loan figures.
If an exemption is approved after closing, there may be a refund path through the VA for a fee that was charged incorrectly. Keep your closing disclosure and VA documentation. Those records matter.
Purchase, Cash-Out, or IRRRL: Know the Difference
| Feature | VA Rate-and-Term Refinance | VA Cash-Out Refinance | VA IRRRL |
|---|---|---|---|
| Primary purpose | Replace terms or rate without taking equity cash | Replace loan and access available equity | Streamline an existing VA loan |
| Funding fee | Usually purchase-style fee rules apply | Usually 2.15% first use or 3.30% subsequent use | Generally 0.50% |
| Maximum loan-to-value approach | Depends on transaction and underwriting | Up to 100% VA loan-to-value when eligible | Typically based on existing VA loan payoff and permitted costs |
| Appraisal | May be required | Generally required | Often not required, depending on file |
| Credit and income review | Full review is typical | Full review is typical | Usually reduced documentation, but not automatic approval |
| Best fit | Payment or term restructuring | Equity access with VA eligibility | Lowering the rate on an existing VA loan |
Here is a clean refinance break-even example. Assume an existing VA loan payment drops by $162 per month through an IRRRL. The total financed and out-of-pocket refinance costs are $4,600, including a $2,000 IRRRL funding fee on a $400,000 base loan. The break-even calculation is $4,600 divided by $162 monthly savings, which equals 28.4 months. If you expect to keep the loan longer than about 29 months, the savings may justify the cost. If you plan to sell in a year, it probably does not.
That is also why “no-out-of-pocket closing options” deserve a careful look instead of a quick yes. A higher rate can create a credit to offset eligible costs, but it can reduce or erase the monthly savings. There is no magic, just trade-offs.
Rates, Credit, and Local Market Reality
Mortgage rates move daily, while Freddie Mac’s Primary Mortgage Market Survey publishes a weekly national benchmark. Use the most recent Freddie Mac PMMS release as context, not as your final VA quote. Your rate depends on loan size, occupancy, credit profile, discount points, loan term, and the pricing available through the broker channel on the day you lock.
VA does not publish a universal minimum credit score, but broker program requirements commonly start around 580 to 620 depending on the file. A 620 score, documented stable income, and clean recent payment history usually create more options than a borderline score with late payments. For a two- to four-unit property, expect the file to receive closer scrutiny and potentially require reserves, often at least three months of principal, interest, taxes, and insurance.
For context, the 2025 baseline conforming loan limit was $806,500. VA loans do not use that number the same way conventional loans do for eligible borrowers with full entitlement, but it remains useful when comparing program structures. Conventional cash-out refinancing generally caps at 90% loan-to-value, while eligible VA cash-out refinancing can reach 100% loan-to-value. Those are not interchangeable rules.
In central Virginia, the market is still specific block by block. Realtor.com reported a median listing price around $475,000 in Henrico County during 2025. Short Pump and Glen Allen remain competitive for well-priced homes, while parts of Midlothian and Chesterfield can give buyers more choice depending on price point and condition. Inventory has improved from the tightest recent years, but turnkey homes can still attract fast offers. A VA offer should be organized, not apologetic.
Protect Your Credit While You Plan
A soft credit pull mortgage review can help you estimate buying power before a formal application. If you are searching for a no hard inquiry mortgage pre approval, ask what type of credit review is actually being used. “Prequalified” can mean very different things.
A mortgage pre approval without hard pull may be useful for early planning, especially when you are comparing a purchase against an IRRRL or cash-out strategy. A soft pull mortgage broker can review preliminary credit information, income, assets, and estimated payment structure without an immediate hard inquiry. A no credit hit mortgage application is not the same as final underwriting, but it gives you a better starting point than guessing.
Frequently Asked Questions
1. Can I finance the VA funding fee?
Usually, yes. Eligible borrowers can commonly add the funding fee to the VA loan amount rather than paying it in cash.
2. Is the VA funding fee monthly?
No. It is generally a one-time charge, unlike monthly mortgage insurance on some other loan types.
3. Are disabled veterans exempt?
Many borrowers receiving qualifying VA disability compensation are exempt. Confirm the exemption through your certificate of eligibility.
4. What is the IRRRL funding fee?
The standard IRRRL funding fee is generally 0.50% of the base loan amount for non-exempt borrowers.
5. Does a VA cash-out refinance have a funding fee?
Yes, unless you are exempt. The fee is commonly 2.15% for first use and 3.30% for subsequent use with less than 5% equity contribution.
6. Can a VA loan be used again?
Yes. Your available entitlement, prior VA loan status, and transaction details determine how a subsequent use is structured.
7. Does a soft pull replace final credit approval?
No. A soft pull is a planning tool. Final approval requires a complete review under the selected program guidelines.
8. Should I pay the funding fee in cash or finance it?
It depends on your cash reserves, expected time in the loan, rate, and payment goals. Compare both options side by side.
Legal Disclaimer
This article is general educational information, not a commitment to make a loan, an approval, or financial, tax, or legal advice. Rates, fees, VA eligibility, funding fee exemptions, credit standards, loan-to-value limits, and closing costs are subject to change and final program review. A broker can provide loan options only where properly licensed. Duane Buziak is licensed in Virginia, Florida, Tennessee, Georgia, and DC. For actionable purchase or refinance guidance in Virginia, Florida, Tennessee, or Georgia, request a personalized review before making a financing decision.
The funding fee should never be the surprise that changes your plan at the closing table. Get the base loan, fee, payment, cash-to-close, and break-even math on one page, then make the move that saves smarter for your situation.
Duane Buziak | Mortgage Maestro | NMLS #1110647 | Coast2Coast Mortgage, LLC NMLS #376205 | Licensed in VA, FL, TN, GA & DC
[Contact] | NoTouch Credit Pull available — no hard inquiry, no credit hit.