What is VA Funding Fee?

By Liz Clinger Updated on 7/31/2017

To secure home loan benefits through the Department of Veteran Affairs (VA), VA-eligible borrowers must pay a mandatory VA funding fee. Through this charge, the borrower contributes toward the cost of the highly advantageous VA mortgage loan program, thereby lessening the burden on taxpayers.

 

How much is the VA Funding Fee?

The amount that VA borrowers must pay for funding fees varies depending on: if the borrower has already acquired a VA loan, the size of the borrower’s down payment and the borrower’s branch of military service. 

Ranging from 1.25% to 3.3% of the loan, the VA funding fee can add a noticeable cost to the loan amount, and borrowers should be aware of how much they will be charged. To find out how much you will be expected to pay, consult the VA funding fee chart below:

	First-time use, no down payment	First-time use, down payment of 5 – 10%	First-time use, down payment of 10% or more	Second-time use, no down payment	Second-time use, down payment of 5 – 10%	Second-time use, down payment of 10% or more
Regular Military	2.15%	1.5%	1.25%	3.3%	1.5%	1.25%
Reserves/National Guard	2.4%	1.75%	1.5%	3.3%	1.75%	1.5%

VA Funding Fee with No Down Payment

VA borrowers who do not put forth a down payment must pay a larger VA funding fee than borrowers who put forth at least 5% of the loan cost. For first-time VA borrowers in the regular military, the VA charges a funding fee of 2.15%; for National Guard or Reserve servicepersons, the funding fee is 2.4% for first-time borrowers.

Although VA funding fees remain consistent for down payments greater than 5%, second time VA borrowers must pay a more expensive funding fee when no down payment is put forward. Both regular military servicepersons and members of the National Guard or Reserves will be charged the same funding fee of 3.3%.

VA Funding Fee with a Down Payment

Borrowers who put down larger down payments will not have to pay as much regarding VA funding fees. 

For instance, standard military servicepersons with a down payment of 5%-10% must pay a funding fee of 1.5%; however, with a down payment greater than 10%, borrowers will only need to pay a funding fee of 1.25%

Likewise, National Guard and Reserve members can pay a smaller funding fee with a larger down payment, although the funding fee for these borrowers will be slightly higher. 

With a down payment of 5%-10%, National Guard or Reserves borrowers must pay 1.75% of the loan amount, though borrowers making down payments exceeding 10% will only need to pay 1.5%.

Funding Fee Exemption

Under some circumstances, the following borrowers may be exempt from paying the VA funding fee:

• Veterans receiving VA compensation for service-related disabilities
• Veterans who would be entitled to service-related disability compensation if they did not already accept retirement pay.
• Surviving spouses of veterans who died in service or as a result of service-related disabilities (regardless of whether or not the spouse is a veteran)

 

The lender must verify exempt status by obtaining one of the following:

• A properly completed and signed VA Form 26-8937, Verification of VA Benefits, indicating the borrower’s exempt status,
• For a veteran who elected service retirement pay instead of VA compensation, a copy of the original VA notification of disability rating and documentation   of the veteran’s service retirement income, or
• Indications on the Certificate of Eligibility (COE) that the borrower is entitled as an unmarried surviving spouse.