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One of the benefits of serving your country as a member of the U.S. military is gaining access to VA direct and VA-backed home loans. These loans offer veterans, service members, and their survivors access to low-cost VA mortgages. These loans don’t require a down payment or mortgage insurance and have limited closing costs. However, VA loans have something called a VA funding fee, so prospective borrowers need to understand how it works and how the VA calculates the amount.
Learn more: What is a VA loan, and who qualifies?
In this article:
How does the VA funding fee work?
VA loans are insured by the Department of Veterans Affairs, so the VA guarantees a portion of them in case of borrower default. This guarantee means the lender can offer more favorable terms since the VA helps cover some of the risk of default.
While VA backing does make it easier for eligible borrowers to afford a VA loan, the program could increase taxpayer costs. This is why the VA requires borrowers to pay a one-time VA funding fee to defray the cost of guaranteeing these loans.
The current VA funding fee for purchase loans, which went into effect in April 2023, ranges from 1.25% to 3.3% of your total loan amount. The exact amount of your VA funding fee will depend on a number of factors, including the type of loan you are taking, the size of your down payment, and how many times you’ve used your VA loan benefit. For refinances and loan assumptions, the VA funding fee can be as low as 0.5% of your loan amount.
Read more: The best VA loan lenders
What types of loans have VA funding fees?
There are several different types of home loans that eligible borrowers may access through the VA loan program. These loan types include:
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Loan for the purchase or construction of a house
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Loan for a manufactured home
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Cash-out refinancing loan
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Interest rate reduction refinancing loan (IRRRL)
Tip: In addition to these loans, the VA also charges a funding fee for less common loans, including Native American Direct Loans, loan assumptions, and vendee loans for borrowers purchasing a property acquired by the VA. You can learn more about those loans on the Department of Veterans Affairs website.
Dig deeper: What is a VA construction loan, and how does it work?
How much is the VA funding fee?
Each type of VA loan has a different funding fee structure. The VA funding fee 2025 rates are as follows:
VA funding fee chart: Purchase and construction loans
Eligible veterans and service members will pay a VA funding fee that depends on the size of their down payment and whether this is their first VA loan.
For example, let’s say you purchase a $250,000 house using a VA loan for the first time. Like nearly 90% of VA loan borrowers, you are making this purchase without a down payment. In this case, your VA funding fee is 2.15%, or $5,375.
Read more: Zero-down mortgage — How to buy a house with no down payment
VA funding fee chart: Cash-out refinancing loans
Since you do not pay a down payment for a refinance, the only variable that affects the VA funding fee for a cash-out refinance is whether or not it is your first use. Here’s what you can expect to pay:
Learn more: How does a VA loan cash-out refinance work?
VA funding fee chart: Other VA loans
If you are using VA loans to either purchase a manufactured home or to refinance your mortgage to improve your interest rate, the VA funding fee is always the same. The size of your down payment and whether you have taken a VA loan in the past do not affect the funding fee.
Dig deeper: What is a manufactured house, and how do you finance it?
How do I pay the VA funding fee?
You have two options for paying the VA funding fee. You can choose to pay it as a lump sum at closing, or you can choose to have the fee added to the total loan amount.
While financing the VA funding fee by adding it to your loan total will lower your out-of-pocket costs at closing, it will increase the amount of interest you pay on your loan over time.
VA funding fee vs. mortgage insurance
The VA funding fee is a cost added to your closing expenses, and it does act as a type of mortgage insurance. It’s different than the more well-known private mortgage insurance (PMI) in several ways, though.
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Type of loans. The VA funding fee only applies to VA loans. PMI applies to conventional loans. FHA loans, which are backed by the Federal Housing Administration, also charge mortgage insurance called MIP (mortgage insurance premiums). It’s easy to confuse PMI and MIP, but they are for two different mortgage types.
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When you pay the fee. The VA funding fee is a one-time fee paid at closing. PMI is a recurring monthly charge on your mortgage bill based on your loan balance until you have 20% equity in your home.
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Who pays the fee. Most VA loan borrowers pay the VA funding fee. PMI only applies if you’re taking out a conventional loan and make a down payment of less than 20%.
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Total cost. The VA funding fee is a percentage of your total loan amount. PMI is a percentage of your current outstanding mortgage balance, since you typically pay it monthly.
Read more: What is mortgage insurance?
Who is required to pay a VA funding fee?
In general, any borrower who is eligible for a VA loan will be required to pay the VA funding fee. However, there are several exemptions for military service members or veterans who have been injured while serving or for their surviving spouse. Specifically, the following types of VA borrowers are exempt from the VA funding fee requirement:
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Those receiving (or eligible for) VA compensation because of a service-related disability
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Those surviving spouses receiving Dependency and Indemnity Compensation (DIC)
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Those active duty service members who have received a Purple Heart
Learn more: Who qualifies for a VA funding fee exemption?
Refunds
In some instances, select borrowers may qualify for a VA funding fee refund. If you receive compensation from the Department of Veterans Affairs for a service-related disability, you could qualify for a refund. However, the disability compensation start date must be set so it's retroactive to a date before you closed on the VA loan for you to be eligible for the refund.
Read more: When do you need a VA Certificate of Eligibility (COE)?
VA funding fee FAQs
What is the VA funding fee for 2025?
In 2025, the VA funding fee for your first VA loan costs 1.25% to 2.15% of your loan amount (depending on the size of your down payment). If you've used a VA loan before, the funding fee ranges from 1.25% to 3.30%. The funding fee will be lower (0.5%) if you’re using a VA Interest Rate Reduction Refinance Loan (IRRRL) or if you're buying a manufactured home (1%). Those doing a cash-out refinance will pay a funding fee between 2.15% and 3.3%.
Do VA loans have PMI?
No, VA loans do not have PMI or private mortgage insurance. No matter your down payment amount, VA borrowers are only subject to a one-time VA funding fee based on your total loan amount at closing.
Why am I being charged a VA funding fee?
A VA funding fee is one way to offset the cost of lenders providing VA home loans. You only have to pay it at closing, though, unless you choose to roll it into your mortgage principal. Many other types of loans charge similar mortgage insurance for most of your loan term.
This article was edited by Laura Grace Tarpley.
