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0.5% to 3.3%: Which U.S. Veterans Pay the VA Funding Fee in 2026?

· By the HomePilot team · Reviewed by a licensed loan officer · Company NMLS #2752340

0.5% to 3.3%: Which U.S. Veterans Pay the VA Funding Fee in 2026?

Some veterans owe nothing at all. Before you assume either way, pull your Certificate of Eligibility and confirm your exemption status with your lender or a VA regional loan center.

TL;DR:

  • Veterans with a 10% or higher disability rating, certain surviving spouses, or Purple Heart recipients on active duty typically qualify for a VA funding fee exemption confirmed by their Certificate of Eligibility.
  • The VA funding fee ranges from 0.5% for an interest rate reduction refinance loan to 3.3% for a subsequent purchase or cash-out refinance with less than 5% down.
  • Borrowers can pay the fee upfront, roll it into the loan, or have it paid by the seller or third party, with financing often preferred to preserve cash.
  • Most funding fee refunds occur when a retroactive disability rating is approved before closing, and the veteran submits a request through the VA Funding Fee Payment System.
  • Lenders must verify exemption status with a current Certificate of Eligibility and VA Form 26-8937 before closing, making early checks and disclosure review essential for avoiding unnecessary fees.
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Table of Contents

What Is the VA Funding Fee and Why Does the VA Charge It?

The VA funding fee exists because VA loans skip two things conventional borrowers almost always pay for: a down payment and private mortgage insurance. That combination protects lenders against loss, but somebody has to cover the risk the VA guarantee absorbs instead. The funding fee is that somebody, and it’s paid by the borrower rather than the taxpayer at large. According to the Department of Veterans Affairs, the fee applies to most VA-backed purchase and refinance loans, with the exact percentage tied to loan type and usage history.

The fee shows up differently depending on what you’re borrowing for:

  • Purchase loans charge a fee based on your down payment percentage and whether this is your first VA loan.
  • Cash-out refinances carry the highest fees in the chart, since you’re pulling equity out with a new VA-backed loan.
  • Interest Rate Reduction Refinance Loans (IRRRLs), also called VA Streamline Refinances, carry the lowest fee on the chart because you’re not taking on new risk, just lowering your rate on an existing VA loan.

It’s a one-time charge, not an annual premium like FHA mortgage insurance. You either pay it at closing or roll it into your loan balance, and it’s calculated as a percentage of the loan amount, not the home’s purchase price.

VA Funding Fee Chart 2026: Rates by Loan Type

Here’s where the numbers actually live. The VA’s official fee schedule breaks the fee down by loan type, down payment size, and whether you’ve used your VA loan benefit before.

Fees range from 0.5% for an IRRRL up to 3.3% for a subsequent-use purchase or cash-out refinance with less than 5% down, according to the VA. That spread is wide enough to change your closing costs by thousands of dollars, so knowing which row applies to you matters before you ever sign a loan estimate.

VA funding fee rate range chart

Here’s how the math plays out. Say you’re buying a $400,000 home with your first VA loan and no money down: the fee is 2.15% of the loan, or $8,600. Put 10% down instead and the loan drops to $360,000 at the 1.25% tier, a $4,500 fee. Now say you’re refinancing an existing VA loan into an IRRRL with a $350,000 balance: at 0.5%, the fee is $1,750.

Notice both examples calculate the fee against the loan amount, not the home price. A bigger down payment shrinks your loan amount, which shrinks the fee twice over: once by dropping you into a lower percentage tier, and again by reducing the dollar base the percentage applies to.

Who Qualifies for a VA Funding Fee Exemption?

Not every VA borrower pays this fee, and the exemption categories are more common than most homebuyers realize. Veterans are exempt from the funding fee if they receive VA compensation for a service-connected disability, are eligible for compensation but instead receive retirement or active-duty pay, receive certain Dependency and Indemnity Compensation as a surviving spouse, or are active-duty service members who were awarded the Purple Heart on or before their loan closes, according to VA News.

The most common exemption case is a veteran with a 10%+ disability rating from the VA. If that rating is confirmed on your COE before closing, you owe nothing. Surviving spouses receiving Dependency and Indemnity Compensation also typically qualify, as do certain Purple Heart recipients still on active duty.

Illustration of VA fee exemption categories

Your Certificate of Eligibility is where exemption status actually gets confirmed. It’s not a formality: the COE will state directly whether you’re exempt from the funding fee, and lenders are required to check that status before closing rather than assume it. If your COE doesn’t reflect a disability rating you believe applies, that’s a red flag to resolve before you’re at the closing table, not after.

Run through this before you sign anything:

  • Pull an updated COE through eBenefits or ask your lender to request one on your behalf.
  • Tell your lender immediately if you have a pending disability claim, even if it hasn’t been decided yet.
  • Confirm the exemption line on your COE matches what you expect based on your disability rating or survivor status.
  • If something looks wrong, contact a VA regional loan center directly rather than assuming your lender will catch it.

Pro Tip: Don’t wait until underwriting to raise a pending disability claim. The earlier your lender knows, the more time there is to request a memorandum rating before closing, which can be the difference between paying the fee and skipping it entirely.

How Do You Pay the VA Funding Fee?

You have three real options, and the one you pick changes your monthly payment more than most borrowers expect.

  • Pay it in cash at closing. This keeps your loan amount lower and your monthly payment smaller, but it adds to your upfront cash needed.
  • Finance it into the loan. Most borrowers choose this route. It raises your principal balance and your monthly payment slightly, but it means you’re not writing an extra check at closing.
  • Have the seller or a third party pay it. VA rules allow this as part of seller concessions or gift funds, which is worth negotiating during your purchase offer.

Financing the fee is common precisely because it lets you keep more cash for moving costs, reserves, or the inevitable surprises that come with buying a home. The tradeoff is straightforward: a slightly larger loan balance accruing interest over 30 years versus a bigger check today.

One more thing worth a real conversation with a professional: whether the funding fee is deductible on your taxes depends on your situation, and IRS Publication 936 covers how points and certain closing costs are treated. Don’t guess on this one. A tax professional who knows your full picture is worth the call.

When Can You Get a VA Funding Fee Refund?

Refunds happen more often than people expect, usually because a disability rating gets approved after closing but applies to a date before closing. If the VA later determines your disability rating was effective prior to your loan closing, you may be entitled to a full refund of the funding fee you paid.

Here’s how the process generally works:

  1. The VA approves a disability rating retroactive to a date before your closing. This is the trigger event for most refund requests.
  2. Your lender or you submit a refund request through the VA Funding Fee Payment System (FFPS). This is the system lenders use to remit fees and process corrections, per VA circular guidance for lenders.
  3. The VA issues the refund. Refunds issued after July 1, 2019 go directly to the veteran in most cases, not the lender, according to the VA Buyers Guide.

Gather your closing disclosure, your disability rating letter with its effective date, and your loan number before you start. If you financed the funding fee into your loan rather than paying cash, talk to your servicer about how a refund gets applied, since you may want it credited toward principal rather than issued as a separate check.

What Lenders Must Verify Before Closing

VA circulars put real due diligence obligations on lenders, and knowing what your lender is supposed to check gives you leverage to ask the right questions before closing day.

Lenders should request an updated COE whenever a borrower’s exemption status is uncertain, and they’re required to use VA Form 26-8937 to trigger VA research when a service member has a pending pre-discharge claim. Without a memorandum rating in place before closing, that service member remains non-exempt and can’t claim a refund later, even if the claim is eventually approved. Lenders document every fee remittance, correction, and refund request through FFPS, and corrections can flow back to either the lender or the veteran depending on who originally paid the fee.

Before you close, confirm your lender has:

  • Pulled a current COE that reflects your actual exemption status.
  • Filed VA Form 26-8937 if you have a pending disability claim.
  • Explained clearly whether you’re paying the fee, financing it, or exempt.
  • Given you a closing disclosure that shows the funding fee amount and how it’s being handled.

Pro Tip: Ask your loan officer directly: “Has my COE been pulled in the last 30 days, and does it list my current exemption status?” A lender who can’t answer that quickly hasn’t done the work yet.

What Veterans Should Actually Do Before Closing in 2026

Most of the funding fee mistakes we see aren’t about the rate chart. They’re about timing. Veterans wait until underwriting to mention a pending disability claim, or they never pull an updated COE and assume last year’s status still applies.

Check your COE early, ideally before you’re under contract. Tell your lender about any pending claim the moment you start the loan process, not after you’ve locked a rate. Verify your funding-fee status again within a few days of closing, since exemption determinations can change quickly. And if you’re later found exempt, keep every closing document so requesting a refund is fast rather than a scramble.

None of this replaces working with a lender who checks wholesale pricing and confirms your COE status as a matter of process, not an afterthought.

The HomePilot Team

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HomePilot Mortgage is the alternative to shopping rate sheet by rate sheet: we price your VA loan across 40+ wholesale lenders at once, with $0 lender fees, and back it with a published $500 Best Price Guarantee (eligible offers, terms apply). As a family-owned wholesale broker licensed in Arizona, California, Colorado, Florida, and Texas, we post our live rates next to the national average every business day at HomePilot Mortgage, so you can see exactly what a VA loan costs before you commit to anything.

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If you’re already deep into a purchase or refinance and want a second set of eyes on your closing costs, including how your funding fee is being handled, our free loan estimate review compares your current offer against wholesale pricing at no cost. Ready to see your own VA loan numbers? Start a purchase quote on our purchase page or explore refinance options if you’re eyeing an IRRRL or cash-out refinance on our refinance page. Purchases typically close in about 20 days from an accepted offer, with a standard commitment of 30 days or less, and getting a quote takes minutes with no hard credit pull to start.

This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.

Sources

FAQ

Why Am I Paying a VA Funding Fee?

You’re paying it because VA loans don’t require a down payment or private mortgage insurance, and the funding fee offsets that added risk for lenders. The VA charges it as a one-time percentage of your loan amount unless you qualify for an exemption.

Does the VA Have a Funding Fee?

Yes, most VA-backed purchase and refinance loans carry a funding fee, ranging from 0.5% to 3.3% of the loan amount depending on loan type, down payment, and prior use, according to the VA. Veterans with a qualifying disability rating or certain surviving spouses are exempt.

How Do I Avoid the VA Loan Funding Fee?

You avoid it by qualifying for an exemption, most commonly a 10%+ disability rating from the VA, retirement or active-duty pay in place of compensation eligibility, certain Dependency and Indemnity Compensation, or active-duty Purple Heart status confirmed before closing, per VA News. Outside of exemptions, choosing an IRRRL over a cash-out refinance keeps the fee at its lowest rate.

What Is the VA Funding Fee Right Now?

In 2026, the fee ranges from 0.5% for an IRRRL to 3.3% for a subsequent-use purchase or cash-out refinance with less than 5% down, per the VA’s official chart. Your exact rate depends on your down payment, loan type, and whether you’ve used a VA loan before.

Can HomePilot Help Me Check My VA Funding Fee Before Closing?

Yes. HomePilot Mortgage prices VA loans across 40+ wholesale lenders and can review your loan estimate to confirm the funding fee is calculated and disclosed correctly. Start with a free loan estimate review or check current VA rates directly.

HomePilot Mortgage, NMLS #2752340, is a licensed mortgage broker in Arizona, California, Colorado, Florida, and Texas. Equal Housing Lender. This article is general information, not a loan offer or a commitment to lend. Rates and program terms change daily and depend on credit, loan amount, and county. HomePilot Mortgage is a private company, not affiliated with or endorsed by the Department of Veterans Affairs, HUD, or any government agency.