VA funding fee and loan closing costs | Veterans Affairs (2024)

Learn about the VA funding fee and other closing costs you may need to pay on your VA-backed or VA direct home loan.

About the VA funding fee

What is the VA funding fee?

The VA funding fee is a one-time payment that the Veteran, service member, or survivor pays on a VA-backed or VA direct home loan. This fee helps to lower the cost of the loan for U.S. taxpayers since the VA home loan program doesn’t require down payments or monthly mortgage insurance.

Will I have to pay the VA funding fee?

If you’re using a VA home loan to buy, build, improve, or repair a home or to refinance a mortgage, you’ll need to pay the VA funding fee unless you meet certain requirements.

You won’t have to pay a VA funding fee if any of these descriptions are true for you:

You’re receiving VA compensation for a service-connected disability,or
You’re eligible to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead,or
You’re receiving Dependency and Indemnity Compensation (DIC) as the surviving spouse of a Veteran,or
You’re aservice member who has received a proposed or memorandum rating before the loan closing date that says you’re eligible to get compensation because of a pre-discharge claim, or
You’re aservice member on active duty who, before or on the loan closing date, provides evidence of havingreceivedthe Purple Heart

Funding fee refunds

You may be eligible fora refund of the VA funding fee if you’re later awarded VA compensation for a service-connected disability. The effective date of your VAcompensation must be retroactive to before the date of your loan closing.

If you get a proposed or memorandum rating after your loan closing date, you’ll still need to pay the funding fee. You won’t be eligible for a refund based on this rating.

If you think you’re eligible for arefund, please call your VA regional loan center at877-827-3702(TTY: 711). We’re here Monday through Friday, 8:00 a.m. to 6:00 p.m. ET.

How will I pay this fee?

You’ll pay this fee when you close your VA-backed or VA direct home loan.

You can pay the VA funding fee in either of these ways:

Include the funding fee in your loan and pay it off over time (called financing),or
Pay the full fee all at once at closing

How much will I pay?

This depends on the amount of your loan and other factors.

For all loans, we’ll base your VA funding fee on these factors:

VA funding fee rate charts

Effective April 7, 2023

Review the VA funding fee rate charts on this page to determine the amount you’ll have to pay. Down payment and VA funding fee amounts are expressed as a percentage of total loan amount.

For example: Let’s say you’re using a VA-backed loan for the first time, and you’re buying a $200,000 home and paying a down payment of $10,000 (5% of the $200,000 loan). You’ll pay a VA funding fee of $2,850, or 1.5% of the $190,000 loan amount. The funding feeapplies only tothe loan amount, not the purchase price of the home.

VA-backed purchase and construction loans

Rates for Veterans, active-duty service members, andNational Guard and Reserve members

If your down payment is… Your VA funding fee will be… First use Less than 5% 2.15% 5% or more 1.5% 10% or more 1.25% After first use Less than 5% 3.3% 5% or more 1.5% 10% or more 1.25%

Note: If you used a VA-backed or VA direct home loan to purchase only a manufactured home in the past, you’ll still pay the first-time funding fee.

VA-backed cash-out refinancing loans

Rates for Veterans, active-duty service members, and National Guard and Reserve members

First use After first use 2.15% 3.3%

Native American Direct Loan (NADL)

Type of use VA funding fee Purchase 1.25% Refinance 0.5%

Note: The VA funding fee rate for this loan doesn’t change based onyour down payment amount or whether you’ve used the VA home loan program in the past.

Other VA home loan types

Loan type VA funding fee Interest Rate Reduction Refinancing Loans (IRRRLs) 0.5% Manufactured home loans (not permanently affixed) 1% Loan assumptions 0.5% Vendee loan, for purchasing VA-acquired property 2.25%

Note: The VA funding fee rates for these loans don’t change based onyour down payment amount or whether you’ve used the VA home loan program in the past.

Other loan closing costs

Who determines my loan details?

We don’t determine most details of your home loan.

Your home loan lender will determine these details of your loan:

Interest rate
Discount points (fees you may pay to your lender at closing to get a lower interest rate on your loan)
Other closing costs

These rates may vary from lender to lender. You should know that adding the VA funding fee and other loan costs to your loan could lead to you owing more money than the fair market value of the home. This could reduce the benefit of refinancing since your payment wouldn’t be as low as you may want it to be. It could also make it harder for you to get enough money out of the future sale of the home to pay off your loan balance.

Who pays for which closing costs?

The seller must pay these closing costs (sometimes called seller’s concessions):

Commission for real estate professionals
Brokerage fee
Buyer broker fee
Termite report (unless you’re using a refinancing loan)

You (the buyer) or the seller can negotiate who will pay other closing costs such as these:

VA funding fee
Loan origination fee
Loan discount points or funds for temporary “buydowns”
Credit report and payment of any credit balances or judgments
VA appraisal fee
Hazard insurance and real estate taxes
State and local taxes
Title insurance
Recording fee

Note:We require that a seller can’t pay more than 4% of the total home loan in seller’s concessions. But this rule covers only some closing costs, including the VA funding fee. The rule doesn’t cover loan discount points.

Last updated: April 7, 2023

VA funding fee and loan closing costs | Veterans Affairs (2024)

FAQs

Is the VA funding fee part of closing costs? ›

What is the VA Funding Fee? This is a fee that is charged to the veteran borrower to help offset the costs of the home loan program. It is the only closing cost that can be rolled into your VA Loan.

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How to get the VA funding fee waived? ›

Veterans who are receiving or eligible to receive compensation for a service-related disability may be exempt from paying the funding fee. The surviving spouses of veterans who died in service or from a service-related disability may also be exempt from paying the fee.

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How can I avoid closing costs with a VA loan? ›

You can reduce how much you spend on VA closing costs in a variety of ways, such as:

Making a down payment to reduce the VA funding fee.
Applying to eliminate it, if you qualify.
Negotiating so that the seller pays most of the closing costs.
Purchasing discount points to reduce the interest rate on your loan.

May 21, 2024

Can the VA funding fee be partially financed? ›

You'll pay this fee when you close your VA-backed or VA direct home loan. You can pay the VA funding fee in either of these ways: Include the funding fee in your loan and pay it off over time (called financing), or. Pay the full fee all at once at closing.

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What is the VA 1% rule? ›

If the lender is charging the 1 percent fee, they are not allowed to tack on additional charges for things the VA considers overhead. The purpose of the one percent rule is to protect Veterans from excessive fees and ensure the cost of obtaining a VA loan remains affordable.

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Can I get my VA funding fee refunded? ›

The VA funding fee can be waived for eligible service members, veterans or surviving spouses who have a VA-certified disability related to their military service. A refund of the funding fee may be available to: Veterans who are compensated for service-connected disabilities.

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Can you write off the VA funding fee? ›

Yes, you can exempt the amount you paid for the VA funding fee along with your mortgage interest on your taxes. However, if you roll the funding fee into your mortgage, you can only deduct the amount you paid that year. If you paid the entire amount upfront, you can deduct the entire amount for that same tax year.

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What fees cannot be charged on a VA loan? ›

Here are the VA non-allowable fees that you need to consider. Real estate attorney fees: Attorney fees are not allowed for VA home loans. Real estate broker fees: You cannot pay for real estate broker fees when buying a home with a VA loan. Agent or REALTOR® fees: VA borrowers cannot pay real estate agent fees.

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How much are closing costs in VA? ›

Typically, closing costs are about 3 to 6% of the sale price of the home. The average closing costs in Virginia, including taxes, is about $6,200.

How much will my closing costs be on a VA loan? ›

VA closing costs can range from 1 to 6 percent of your loan, but the seller may pay up to 4 percent for you. You can roll the VA funding fee into your loan principal to avoid paying it upfront, but this move will cost you more in interest over the loan term.

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Why do sellers stay away from VA loans? ›

One of the primary reasons some sellers may hesitate to accept a VA loan is due to misconceptions about the program. Some sellers believe that VA loans involve more red tape, delays, or stricter inspection requirements compared to conventional loans. In reality, VA loans are not as cumbersome as they may seem.

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What is the VA limit on closing costs? ›

Generally speaking, the seller can't pay more than 4% of the home loan amount in closing costs. However, the seller is responsible for buyer's agent and listing agent commissions, as well as any brokerage fee and (if applicable) the VA loan termite and pest inspection.

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How to not pay VA funding fee? ›

You may be exempt from the VA funding fee if:

You're an active-duty service member who has received the Purple Heart. You're the surviving spouse of a veteran who died while on duty or because of a service-related illness or disability.

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Is VA funding fee worth it? ›

But even though the VA Funding Fee can make purchasing or refinancing a home slightly more expensive, the benefits of VA loans can often outweigh the initial costs, making a VA home loan worth considering.

How much is a typical VA funding fee? ›

For regular military borrowers with no down payment, the funding fee is 2.3%. The fee increases to 3.3% for borrowers with previous VA loans. For those with a down payment of 5% to 9%, the funding fee is 1.5%. Any loans with a down payment of 10% or higher will include a funding fee of 1.25%.

Is the VA funding fee tax deductible? ›

Is the VA loan funding fee tax-deductible? Yes, you can exempt the amount you paid for the VA funding fee along with your mortgage interest on your taxes. However, if you roll the funding fee into your mortgage, you can only deduct the amount you paid that year.

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Who pays closing costs in VA? ›

Who pays closing costs in Virginia, buyers or sellers? Both buyers and sellers pay some form of closing costs on a home sale in Virginia, as is the case in any state. Both parties will also be on the hook for legal fees if you decide to hire a real estate attorney.

What closing costs are VA buyers not allowed to pay? ›

Agent or REALTOR® fees: VA borrowers cannot pay real estate agent fees. In many cases, these fees will be paid by the seller. Application fees: The lender cannot charge you an application fee. Escrow fees: You'll likely need to fund the escrow account at closing.

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