The VA Funding Fee in 2026: What You Pay, Who Pays Nothing, and When to Put Money Down Anyway | SRK CAPITAL
VA Loans
The VA Funding Fee in 2026: What You Pay, Who Pays Nothing, and When to Put Money Down Anyway
The funding fee is the one real cost of a VA loan, ranging from 0.5% to 3.3% of the loan amount. Roughly a third of VA borrowers are exempt and many of the rest
On a $600,000 home in Riverside County with nothing down, the VA funding fee is $12,900 for a first-time user. That's the one real cost of a loan program that charges no down payment and no monthly mortgage insurance, and it deserves more attention than the thirty seconds most borrowers give it at the closing table. About a third of VA borrowers shouldn't pay it at all, and many of the rest finance it on autopilot when a different structure would save them thousands.
What the Fee Costs in 2026
The fee is a percentage of the loan amount, set by whether you've used the benefit before and how much you put down:
Loan type
Down payment
First use
Subsequent use
Purchase / construction
Less than 5%
2.15%
3.30%
Purchase / construction
5% to 9.99%
1.50%
1.50%
Purchase / construction
10% or more
1.25%
1.25%
Cash-out refinance
N/A
2.15%
3.30%
IRRRL (streamline refinance)
N/A
0.50%
0.50%
Loan assumption
N/A
0.50%
0.50%
A few translations into actual dollars on common California loan sizes:
Loan amount
First use, 0 down (2.15%)
Subsequent use, 0 down (3.30%)
10% down (1.25%)
$450,000
$9,675
$14,850
$5,625
$600,000
$12,900
$19,800
$7,500
$850,000
$18,275
$28,050
$10,625
Notice the subsequent-use jump: 2.15% becomes 3.30% with nothing down. A second-time user on a $600,000 loan pays $19,800 instead of $12,900 — nearly $7,000 for having used a benefit before. But the penalty disappears entirely once you put 5% down: both columns read 1.50%. That single detail changes the down payment decision for repeat users, and it's the row of the table most loan officers never point out.
You're fully exempt from the funding fee if any of these apply:
You receive VA disability compensation for a service-connected condition
You're eligible for disability compensation but receive retirement or active-duty pay instead
You're an active-duty service member who has received the Purple Heart
You're a surviving spouse receiving Dependency and Indemnity Compensation (DIC)
The exemption isn't a discount. It's the entire fee, gone — $12,900 on our Riverside example, $28,050 for a subsequent-use borrower at $850,000. Your exemption status is printed directly on your Certificate of Eligibility, and your lender verifies it there, not from your word or your VA letter. If you believe you're exempt and the COE says otherwise, resolve that with the VA before closing, because correcting it afterward is slower.
Given that roughly a third of VA borrowers qualify for the exemption, this is the first question to settle — before rate shopping, before the fee-structure math, before anything. Everything else in this article only matters if you're actually paying the fee.
The Pending Disability Claim: A $13,000 Timing Question
The situation worth real planning: a disability claim pending at closing. If your rating is later approved with an effective date before your closing date, you're entitled to a full refund of the funding fee you paid. If the fee was financed into your loan, the refund is typically applied against your principal balance; if you paid cash, you get the cash.
Veterans leave this money unclaimed constantly, because nobody tells them the refund exists and no system automatically issues it in every case. If you closed a VA loan while a claim was pending and the rating later came through, contact your lender or the VA regional loan center and request the funding fee refund review. We've seen refunds recovered more than a year after closing.
And if your claim is close to a decision when you're ready to buy, ask the timing question out loud: does a short delay get your effective date ahead of your closing date? A two-week delay that erases a $12,900 fee is one of the best hourly rates you'll ever earn. Your loan officer can't make that call for you, but they should at least surface it — ours do.
Finance It or Pay It in Cash?
Nearly everyone rolls the fee into the loan, and for most borrowers that's right. Financing $12,900 at 6.5% over 30 years adds about $82 a month and roughly $16,500 in total payments over the full term — though almost nobody holds a loan 30 years, and over a realistic 7-year hold the financed fee costs you about $6,900 in payments plus the small remaining balance. The alternative — writing a five-figure check at closing on top of regular closing costs — defeats the point of a zero-down program for buyers who chose VA precisely because cash is the constraint.
Pay cash only if you have genuinely idle money after funding your emergency reserves and any near-term needs. A veteran with $60,000 in savings buying a $450,000 home can reasonably pay the $9,675 fee outright and skip $35 a month of interest forever. A veteran with $18,000 in savings should finance the fee without a second thought; the liquidity is worth more than the interest.
When a Down Payment Beats the Zero-Down Reflex
Zero down is a feature, not an obligation, and the fee tiers reward cash more than people realize. Run the structures side by side on a $600,000 first-use purchase:
Structure
Down payment
Loan amount
Fee rate
Funding fee
Fee saved vs. 0 down
Zero down
$0
$600,000
2.15%
$12,900
—
5% down
$30,000
$570,000
1.50%
$8,550
$4,350
10% down
$60,000
$540,000
1.25%
$6,750
$6,150
The 5% structure turns $30,000 of down payment into $4,350 of immediate fee savings — a guaranteed 14.5% instant return on that cash before you count the smaller loan balance and lower monthly payment. For subsequent users the same move is dramatic: dropping from 3.30% to 1.50% on $570,000 saves $11,250 in fees alone.
Our honest take: most first-use buyers with limited savings should still go zero down and keep their cash — California closing costs, moving, and the first year of homeownership will use it. But repeat users with cash available should almost never pay the 3.30% tier. If you've got 5% and you're a subsequent user, putting it down is close to free money.
The Seller Can Pay It
The funding fee is an allowable closing cost under VA seller concession rules, which means the seller can pay it for you — the entire thing. In a balanced or buyer-leaning market, a seller credit covering the funding fee is a legitimate, common ask, and it stacks with credits toward your other closing costs. On homes that have sat for 30+ days in inland California markets, we see sellers agree to this regularly. The full rules on what sellers can and can't cover are in our VA seller concessions guide, but the short version: standard closing costs have no cap, and the 4% concession limit applies only to extras — which includes the funding fee, and 4% of the purchase price is almost always more than the fee itself.
How the Fee Compares to What Civilians Pay
Worth keeping in perspective: the funding fee replaces both a down payment requirement and monthly mortgage insurance, and it wins that trade easily. An FHA buyer on the same $600,000 purchase pays a 1.75% upfront premium ($10,300 on the base loan after 3.5% down) plus roughly $265 a month in MIP that runs for the life of the loan — over $22,000 in just seven years, on top of the upfront premium and the $21,000 down payment. A conventional buyer with 5% down pays PMI of roughly $200-300 a month until they reach 20% equity. The VA borrower pays the funding fee once and never sees a mortgage insurance line item. Even at the 3.30% subsequent-use tier, the VA structure usually costs less over any realistic hold period than either alternative.
The Ten-Minute Checklist Before You Sign
Confirm your exemption status on the COE itself. If you have a disability claim pending, weigh the closing timeline against the effective date. Price the 5%-down structure next to zero down — especially if this is your second VA loan. Ask whether the seller will absorb the fee before you assume you're paying it. And if you already closed while a claim was pending and the rating came through, go get your refund.
Ten minutes of arithmetic on a fee most people treat as fixed. Start with a rate quote and we'll run every structure against the same purchase price so you can see the real spread.
Related Topics
VA Funding Fee
VA Loans
VA Loan Costs
Veterans
Military Home Buying
About the Author
SRK CAPITAL News Team
VA Loan Specialist
With over 15 years of of combined experience in the mortgage industry, SRK CAPITAL News Team specializes in helping clients navigate complex financial decisions and find the perfect mortgage solution for their needs.
Share this article
Share this article:
VA Loans
VA Loan Disqualifiers: What Actually Stops an Approval (and What Just Delays One)
Most "VA loan disqualifier" lists mix permanent problems with paperwork problems. Only two things genuinely block the benefit: your discharge status and unresolved federal debt. Almost everything else is a timing issue you can fix.