What Is the VA Loan Funding Fee?
The VA funding fee is a one-time fee paid to the Department of Veterans Affairs on every VA loan. It funds the VA loan program — allowing it to offer zero down payment and no PMI to millions of military buyers without taxpayer appropriations. Most borrowers roll it into the loan rather than paying it at closing.
The VA funding fee replaces PMI. On a $650,000 conventional loan at 0.8% annual PMI, you pay $433/month indefinitely. The one-time VA funding fee on the same loan is approximately $13,975 total. The VA loan wins financially in virtually every scenario.
2025 VA Funding Fee Rates
| Service Type | First Use — 0% Down | First Use — 5%+ Down | First Use — 10%+ Down | Subsequent Use — 0% Down |
|---|---|---|---|---|
| Active Duty / Veteran | 2.15% | 1.50% | 1.25% | 3.30% |
| Reserves / Nat. Guard | 2.40% | 1.75% | 1.50% | 3.30% |
Example: A first-time active-duty buyer purchasing a $650,000 home with zero down pays a funding fee of 2.15% × $650,000 = $13,975. Rolled into the loan, this adds approximately $90/month at 6.75%.
Who Is Exempt from the VA Funding Fee?
- Veterans receiving VA compensation for a service-connected disability
- Veterans entitled to VA compensation but receiving retirement pay instead
- Surviving spouses of veterans who died in service or from service-connected disability
- Service members who received a Purple Heart (closing before separation)
- Active-duty members with a pre-discharge disability rating from VA or DoD
Even a 0% rating with a service-connection determination can qualify for the exemption. Always verify your status before closing. Many military buyers pay thousands in funding fees they were legally exempt from.
First Use vs. Subsequent Use
The most important distinction is first vs. subsequent use. Subsequent use triggers 3.30% vs. 2.15% — a significant jump. This is why the Military Wealth Stack recommends selling and restoring entitlement when possible before using VA again. You reset to the lower 2.15% first-use rate.
Should You Make a Down Payment to Reduce the Fee?
A 5% down payment reduces the fee from 2.15% to 1.50% — saving 0.65%. On a $650,000 loan that is $4,225 in savings — but you spend $32,500 to get there. Preserve your cash. The VA loan is designed for zero down. Your savings are worth more deployed elsewhere.
Frequently Asked Questions
What is the VA loan funding fee for 2025?
For first-time active-duty and veteran buyers with zero down, the 2025 VA funding fee is 2.15%. Reserves and National Guard pay 2.40%. Subsequent use with zero down is 3.30% for all service types. A 5%+ down payment reduces rates to 1.50% (active duty/veteran) or 1.75% (Reserves/Guard).
Who is exempt from the VA funding fee?
Veterans receiving VA compensation for a service-connected disability are exempt. Surviving spouses of veterans who died in service or from service-connected disability are exempt. Service members who received a Purple Heart closing before separation are exempt. Always verify your status before closing.
Can you roll the VA funding fee into the loan?
Yes. The VA funding fee can be financed into the loan balance rather than paid at closing. This is the most common approach. On a $650,000 loan with a 2.15% funding fee, rolling it in adds approximately $90/month to the payment.
Is the VA funding fee worth it compared to conventional PMI?
Almost always yes. PMI at 0.8% annually on a $650,000 conventional loan costs $433/month for potentially 7-10 years — totaling $36,000+. The one-time VA funding fee is $13,975. The VA loan wins financially in virtually every scenario.
Does the VA funding fee apply to duplex and multi-unit purchases?
Yes. The same funding fee rates apply regardless of the number of units. This does not change the financial advantage of buying multi-unit with a VA loan — rental income from other units still typically eliminates the net housing cost entirely.
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