A VA loan payment is principal and interest plus a twelfth of your property tax and home insurance, with nothing for mortgage insurance. The one extra cost is the VA funding fee: a one-time percentage of the loan, 2.15% on a first-use purchase with less than 5% down, which you can add to the loan or pay at closing. Borrowers who receive VA disability compensation pay none.
VA funding fee rates
VA sets the fee as a percentage of the loan amount, not the price. For a purchase or construction loan it depends on the down payment and on whether you have used the benefit before. These rates have applied since 7 April 2023.
VA funding fee for purchase and construction loans| Down payment | First use | After first use |
|---|
| Less than 5% | 2.15% | 3.3% |
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| 5% to under 10% | 1.5% | 1.5% |
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| 10% or more | 1.25% | 1.25% |
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VA’s own example: a first-time user buying a $200,000 home with $10,000 down (5%) pays 1.5% of the $190,000 loan, $2,850. The calculator reproduces it. A past VA loan used only for a manufactured home still counts as first use.
Other VA loans charge a flat rate that does not depend on the down payment:
VA funding fee for other loan types| Loan type | First use | After first use |
|---|
| Cash-out refinance | 2.15% | 3.3% |
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| Interest rate reduction refinance (IRRRL) | 0.5% | 0.5% |
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| Manufactured home, not permanently affixed | 1% | 1% |
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| Loan assumption | 0.5% | 0.5% |
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| Vendee loan, for a VA-acquired property | 2.25% | 2.25% |
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| Native American Direct Loan, purchase | 1.25% | 1.25% |
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| Native American Direct Loan, refinance | 0.5% | 0.5% |
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Who pays no funding fee
VA waives the fee if any of these is true on the day the loan closes:
- You receive VA compensation for a service-connected disability.
- You are eligible for that compensation but receive retirement or active-duty pay instead.
- You receive Dependency and Indemnity Compensation as the surviving spouse of a Veteran.
- You are a service member with a proposed or memorandum rating, issued before closing, that says you are eligible for compensation because of a pre-discharge claim.
- You are on active duty and show evidence, on or before closing, that you received a Purple Heart.
On the $350,000 example, the exemption saves the $7,525 fee and $47.56 a month. If you are later awarded compensation with an effective date before your closing, you may be due a refund of the fee. A seller can also pay the fee for you as a concession, within VA’s limit of 4% of the home’s reasonable value on concessions.
Is 5% down worth it on a VA loan?
A VA loan needs no down payment, but the fee drops at 5% and again at 10%. On the $350,000 example, first use:
Funding fee, loan and monthly payment with 0%, 5% and 10% down| Down payment | Fee | Loan | A month | Total interest |
|---|
| 0%, $0 | 2.15%, $7,525.00 | $357,525.00 | $2,701.47 | $456,003 |
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| 5%, $17,500 | 1.5%, $4,987.50 | $337,487.50 | $2,574.82 | $430,447 |
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| 10%, $35,000 | 1.25%, $3,937.50 | $318,937.50 | $2,457.57 | $406,787 |
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Putting $17,500 down cuts the fee by $2,537.50 and the loan by $20,037.50. The break point matters most after first use: with less than 5% down the fee is 3.3%, $11,550 here, and 5% down brings it to $4,987.50, $6,562.50 less. Whether that is worth it depends on what else the cash could do, such as repairs or an emergency fund.
Adding the fee to the loan or paying it at closing
On a purchase loan the funding fee is the only closing cost VA lets you finance; everything else is paid when the loan closes. Financed, the $7,525 fee on the example raises the payment by $47.56 a month and costs $9,598 in interest over 30 years. Paid at closing, it needs $7,525 of cash on the day instead.
Taxes and insurance: the escrow part of the payment
Most lenders collect property tax and homeowners insurance with the mortgage payment and pay the bills from an escrow account, so the calculator adds a twelfth of each annual bill. On the example that is $291.67 of tax and $150.00 of insurance, $441.67 of the $2,701.47. Property tax varies widely by county, so use the bill on the listing or the county assessor’s figure, and add HOA dues if the home has them. Lenders may also hold a small cushion in escrow, which the calculator does not include.
What the payment does not include is mortgage insurance. A conventional loan with less than 20% down usually carries private mortgage insurance, and an FHA loan carries its own premium; a VA loan has neither. VA says the funding fee exists to lower the program’s cost to taxpayers, since it asks for no down payment and no monthly mortgage insurance.
VA loan limits and entitlement
With full entitlement there is no county loan limit: VA’s guaranty usually covers 25% of whatever a lender approves, so the lender’s approval of your income, debts and credit sets the size of the loan. Either way, the loan before the funding fee cannot be more than the lower of the price and the appraised value.
If part of your entitlement is tied up in another VA loan, the county limit comes back. VA’s example: $50,000 already used, in a county with a $900,000 one-unit limit, leaves 25% of $900,000 less $50,000, or $175,000, and most lenders will lend four times that, $700,000, with no down payment. Above that, expect the lender to ask for a down payment.
Sources and methodology
Funding fee rates, exemptions and entitlement rules come from the U.S. Department of Veterans Affairs.
Method. The fee rate is read from VA’s chart using the down payment as a share of the price, as in VA’s own example, and charged on the price less the down payment. The payment is the standard fixed-rate formula on the amount borrowed, with a monthly rate of the annual rate divided by 12, and the year-by-year table is built payment by payment. The engine is verified on every change against 24 assertions, including VA’s $2,850 funding fee example and its $700,000 entitlement example, the fee band edges at exactly 5% and 10% down, and 300 random loans checked for the exemption, the monthly total and the cost of financing the fee. The count is published on the formula verification page.