VA funding fee: What to expect in 2025

VA loans are specialized mortgages for service members, veterans, and their surviving spouses. They offer a number of benefits, such as not requiring a down payment, but many people will need to pay the VA loan funding fee as part of this kind of loan.

The funding fee for a VA loan is usually a few percent of the loan’s amount. This can add up to a significant amount. We’ll break down what the VA funding fee is, why it’s charged, and what you need to know.

What is a VA funding fee?

A VA loan funding fee is a one-time fee that you need to pay to the Department of Veterans Affairs when you get a VA loan.

Not everyone is eligible to get a VA loan. They are limited to veterans, service members, National Guard, and Reserve members, as well as surviving spouses. Full criteria for eligibility are available on the VA’s website.

The amount you pay as your funding fee depends on whether you’ve used a VA loan before and the amount of your down payment. It’s usually 2.15% for first-time borrowers who put down less than 5% and 3.3% for repeat borrowers putting down less than 5%, but it can be as low as 1.25%.

Keep in mind that funding fees can change based on congressional legislation, so you may pay different fees if you get a VA loan in the future.

How much is the VA funding fee in 2025?

The amount you pay for your VA funding fee when buying a typical home depends on whether you’ve had a VA loan in the past and the size of your down payment. First-time borrowers and people who make larger down payments get a lower fee.

Other types of VA mortgages, such as refinance loans or loans for manufactured homes, have different fee structures. Understanding these fees is key to planning your budget and the costs related to getting VA-backed financing for your home.

How does the VA funding fee differ from mortgage insurance?

Mortgage insurance is a common cost for other types of mortgages, such as conventional loans or FHA loans. It’s common enough that sometimes you’ll hear the VA funding fee called VA loan mortgage insurance or VA loan PMI.

With a conventional mortgage, you may have to pay for private mortgage insurance (PMI) if you put down less than 20% when buying your home. PMI is added as an additional fee to your monthly bill. PMI can be canceled when you reach 20% equity in the home.

With FHA loans, you pay a mortgage insurance premium (MIP). MIP consists of both an upfront payment and ongoing monthly payments. Depending on your down payment, MIP cancels after 11 years or lasts for the full term of the loan.

Like mortgage insurance, the VA loan funding fee helps to protect the VA if you wind up defaulting on your loan. However, unlike MIP or PMI, the VA loan funding fee is paid entirely up front and has no ongoing, monthly component.

Why is the VA loan funding fee assessed?

The VA loan funding fee is charged to borrowers to help cover the costs of the VA lending program.

The VA does not offer loans directly. Instead, it works with lenders that offer VA loans. The VA provides some amount of insurance for those loans, reducing the lenders’ risk and letting them offer loans with no down payment requirement and competitive rates.

The funding fee helps compensate the VA for its services, keeping the program sustainable for future borrowers.

How is the fee paid?

VA loan funding fees are an upfront cost added to your mortgage. The fee is due at the time you close on your loan and gets included in your closing costs. Your lender will submit the funding fee to the VA on your behalf.

Though the fee is due upfront and it can be quite significant, especially if you’re buying a pricey home, you may not need to be able to come up with the full amount all at once. There are a few ways to pay the funding fee.

• Paying upfront. This is the simplest option, but it requires that you cover the fee out of pocket.
• Financing it into the loan. You can roll the amount of the funding fee into your mortgage balance. That lets you avoid a large up front cost, but does mean a higher monthly payment and higher long-term cost of the loan.
• Asking the seller to pay. If you’re in a buyer’s market, you may be able to ask for seller concessions, such as getting the seller to pay your VA loan funding fee.

Are there any VA funding fee exemptions?

Not every VA loan borrower must pay the VA funding fee. The following types of people are typically eligible for a funding-fee exemption:

• Individuals who receive compensation for a service-related disability
• Individuals who are eligible for service-related disability pay but receive retirement pay or active service pay
• Surviving spouses who meet the eligibility requirements for the VA home loan program
• Active-duty service members who’ve been awarded a Purple Heart

To get a VA loan, you must first get a certificate of eligibility (COE). Your COE will clearly state whether you qualify for an exemption to the VA loan funding fee.

If you don’t have a COE yet, you can apply for one on the VA’s website.

Are you eligible for a VA funding fee refund?

VA loans can be complicated, so it’s possible that you got a VA loan and paid a funding fee even if you should have been exempt from paying the fee. If you find yourself in that situation, you may be able to qualify for a refund.

For example, if you had a disability claim that was pending during your closing but that was later approved with a retroactive date before your closing date, you can request a refund.

If you believe you are eligible for a refund, reach out to your lender or call the VA Regional Loan Center at 877-827-3702.

The bottom line: Despite the VA funding fee, eligible homeowners can benefit from a VA loan

The VA loan funding fee is an additional cost that people applying for a VA loan need to pay. While it can be sizable, the benefits of VA loans, such as not requiring a down payment and having competitive rates, are significant. Being aware of how these fees work and knowing how much you’ll have to pay is essential if you want to make sure a loan will be affordable for you.

If you’re ready to learn more about VA loans, you can read more about the VA loans offered by Rocket Mortgage^®.