What Is the VA Funding Fee?
The VA funding fee is a one-time charge paid by most veterans using a VA home loan. It is not paid to the lender — it goes directly to the U.S. Department of Veterans Affairs to help fund the VA loan program and keep it self-sustaining for future generations of veterans.
Unlike private mortgage insurance (which conventional borrowers pay monthly for years), the VA funding fee is a single, one-time payment — and it can be rolled into the loan so you pay nothing out of pocket.
2024 VA Loan Funding Fee Rates
Funding fees are set by Congress and adjusted periodically. The current rates for 2024 are:
Purchase Loans and Cash-Out Refinances
| Loan Use | Down Payment | Funding Fee |
|---|---|---|
| First use | 0% | 2.15% |
| First use | 5%–9.99% | 1.50% |
| First use | 10% or more | 1.25% |
| Subsequent use | 0% | 3.30% |
| Subsequent use | 5%–9.99% | 1.50% |
| Subsequent use | 10% or more | 1.25% |
Refinance Loans
| Loan Type | Funding Fee |
|---|---|
| VA IRRRL (streamline refinance) | 0.50% |
| Cash-out refinance (first use) | 2.15% |
| Cash-out refinance (subsequent use) | 3.30% |
Other VA Loan Types
| Loan Type | Funding Fee |
|---|---|
| Manufactured home (not permanently affixed) | 1.00% |
| Loan assumptions | 0.50% |
| Vendee loans (VA-acquired property) | 2.25% |
Real Dollar Amounts: Texas Home Prices
| Home Price | First Use (0% down) | Subsequent Use (0% down) |
|---|---|---|
| $265,000 (Killeen area) | $5,698 | $8,745 |
| $330,000 (Hutto/Pflugerville) | $7,095 | $10,890 |
| $400,000 (Round Rock) | $8,600 | $13,200 |
| $460,000 (Georgetown) | $9,890 | $15,180 |
| $550,000 (Austin suburbs) | $11,825 | $18,150 |
Who Is Exempt From the VA Funding Fee?
The funding fee is completely waived for:
- Veterans receiving VA disability compensation at any percentage rating (even 0% if officially recognized)
- Surviving spouses receiving Dependency and Indemnity Compensation (DIC)
- Active duty service members who have received a Purple Heart and are on active duty at the time of loan closing
- Veterans who would be entitled to disability compensation but for receipt of active duty or retirement pay (referred to as "would be" veterans)
If you have a pending VA disability claim at the time of closing and it is later approved retroactively, you are entitled to a refund of the funding fee you paid.
How to Pay the VA Funding Fee
Option 1: Roll It Into the Loan (Most Common)
The funding fee is added to your loan balance and paid over the life of the loan. On a $350,000 purchase with a 2.15% fee ($7,525), your total loan becomes $357,525. Monthly payment increase: approximately $45/month.
Option 2: Pay at Closing
You can pay the funding fee in cash at closing if you prefer to keep your loan balance lower. This reduces your total interest paid over the life of the loan.
Option 3: Have the Seller Pay
The VA funding fee counts toward the 4% seller concession limit. On a $350,000 home, the seller can contribute up to $14,000 in concessions — enough to cover the $7,525 funding fee plus additional closing costs.
Strategies to Minimize the Funding Fee
Check Your VA Disability Status First
Before closing, confirm whether you have any VA disability rating — even a pending claim. A 10% rating waives the entire fee. Veterans who receive a rating after closing may be eligible for a refund.
Put 5% Down If You Have the Cash
On a second-use VA loan, putting 5% down reduces the funding fee from 3.30% to 1.50% — a savings of 1.80%. On a $400,000 loan, that is $7,200 saved in exchange for $20,000 in down payment. Run the math for your situation.
Use the IRRRL to Refinance at a Low Fee
If you already have a VA loan and want to lower your rate, the IRRRL carries only a 0.50% funding fee — far lower than a full cash-out or new purchase loan.
Frequently Asked Questions
The VA funding fee may be deductible depending on your situation. Tax rules change frequently — consult a CPA or tax professional familiar with veteran tax benefits for guidance specific to your Texas return.
Funding fee rates are set by Congress and can change with new legislation. The rates in this article reflect 2024 rates. Check VA.gov or consult your lender for the most current rates before closing.
Yes. Proactively inform your lender of any disability rating and provide your VA award letter. Do not assume the exemption will be applied automatically without documentation — errors can be difficult to correct after closing.
