On a $400,000 VA purchase with no down payment, a first-time user’s 2.15% VA loan funding fee is $8,600. If financed into a 30-year loan at an assumed 6.25% fixed rate, the base principal-and-interest payment is about $2,462.40; financing the fee raises it to about $2,515.34. That $52.94 monthly difference equals $3,176.40 in scheduled payments over five years. For many eligible buyers in Richmond, Glen Allen, and Short Pump, that is a manageable trade-off for preserving cash, but it should be a deliberate decision rather than a surprise at closing.
Table of Contents
- What the VA loan funding fee pays for
- Current funding-fee percentages
- A worked purchase example
- When the fee can be waived
- Funding the fee versus paying cash
- Why a broker comparison matters
- Local market context
- FAQ
What Is the VA Loan Funding Fee?
The VA loan funding fee is a one-time charge on most VA-backed purchase and refinance transactions. It supports the VA home loan guaranty program and helps keep the program available without requiring monthly mortgage insurance. Unlike many conventional financing options, a VA loan generally does not require monthly private mortgage insurance, even with little or no down payment.
The fee is set by law and depends on the transaction type, whether the borrower has used VA entitlement before, and the down payment amount. The figures below reflect the standard purchase-loan structure commonly used in recent VA guidance. Program rules can change, so final disclosures and eligibility determinations control.
For 2025, the Federal Housing Finance Agency baseline conforming loan limit is $806,500 for a one-unit property in most U.S. counties. VA financing does not use that same baseline limit in the same way for eligible borrowers with full entitlement, but the conforming limit is still useful context when comparing VA, conventional, jumbo, FHA, and non-QM options.
VA Loan Funding Fee Rates for Purchases
For a first-time VA purchase with less than 5% down, the fee is generally 2.15% of the base loan amount. With a 5% to 9.99% down payment, it is generally 1.5%. At 10% or more down, it is generally 1.25%.
For subsequent VA use, the standard fee is commonly 3.3% with less than 5% down, 1.5% with 5% to 9.99% down, and 1.25% with at least 10% down. A cash-out refinance generally carries a higher percentage than an Interest Rate Reduction Refinance Loan, often called an IRRRL. An IRRRL commonly has a 0.5% funding fee, while certain refinance structures may differ based on use and eligibility.
The fee is calculated against the base loan before the fee is financed. On a $400,000 first-use purchase with no down payment, $400,000 multiplied by 2.15% equals $8,600. If the buyer puts 5% down on that same purchase and finances a $380,000 base loan, the 1.5% fee is $5,700. The down payment reduces both the base balance and the fee.
Worked Dollar Example: Finance It or Pay It at Closing?
Assume a $400,000 home purchase in Chesterfield County. The buyer is a first-time VA user, makes no down payment, and receives a 6.25% fixed interest rate for 30 years. The funding fee is $8,600.
If the buyer pays the fee in cash, the loan amount is $400,000 and the estimated principal-and-interest payment is $2,462.40. If the buyer finances the fee, the loan amount becomes $408,600 and the estimated principal-and-interest payment is $2,515.34. The difference is $52.94 per month.
After 60 payments, the financed-fee choice has required $3,176.40 more in scheduled principal-and-interest payments. It also leaves a higher outstanding balance. Paying the fee upfront costs more cash on day one, while financing protects reserves for moving costs, repairs, or a competitive offer. Neither answer is automatically better.
Closing costs beyond the funding fee can commonly run roughly 2% to 5% of the purchase price, depending on title, prepaid taxes, insurance, appraisal, and local charges. Ask about our no-out-of-pocket closing options when cash preservation matters. In any title-cost comparison, remember that Duane’s preferred title company may save an additional $2,000 on average, subject to transaction details and title services selected.
Who Is Exempt From the VA Funding Fee?
Some borrowers do not pay the VA loan funding fee. The most common exemption applies to veterans receiving VA disability compensation. Certain service members eligible to receive compensation may also qualify, as may some surviving spouses. A borrower’s Certificate of Eligibility and final VA determination establish whether an exemption applies.
Do not assume a disability rating automatically appears correctly in the file. Confirm the exemption early, before budgeting a down payment or negotiating seller-paid costs. If the exemption is approved after closing, a refund may be possible in qualifying situations, but planning accurately upfront is better.
Why Local Pricing Still Matters
The VA funding fee is national, but your buying strategy is local. Redfin county market data reported a Henrico County median sale price of approximately $399,000 in mid-2025. That makes the $400,000 example above especially relevant for buyers comparing Glen Allen and Short Pump listings. In Richmond, tighter inventory at entry-level price points can make quick underwriting and clean financing terms more valuable than simply chasing the lowest advertised rate.
Chesterfield County and Henrico County buyers may see different property-tax estimates, homeowners-insurance costs, and appraisal dynamics even when the price is similar. A VA appraisal is not a home inspection, so buyers should still understand the property’s condition, especially where competitive inventory encourages fast decisions.
A Broker Comparison Before You Commit
A mortgage broker can compare multiple program outlets and help determine whether VA financing is the strongest fit against FHA, conventional, bank statement, DSCR, or non-QM options. A single-shelf institution generally evaluates only the programs it offers directly. For an eligible veteran, VA is often compelling, but a clear comparison should include rate, cash to close, funding fee, and long-term plans.
| Decision point | Mortgage broker approach | Single-shelf institution approach |
|---|---|---|
| Program selection | Can compare VA, FHA, conventional, DSCR, bank statement, and non-QM options across available outlets. | Limited to that institution’s own program shelf. |
| Funding-fee strategy | Models cash payment versus financing the fee alongside total cash to close. | May model available in-house choices only. |
| Credit review | Can begin with a soft credit pull mortgage review when available. | Policies vary by institution and application path. |
| Offer preparation | Coordinates preapproval documentation, payment scenarios, and property-specific estimates. | Service process and turnaround vary by branch and platform. |
| Title-cost review | Can compare disclosed costs; preferred title company may save an additional $2,000 on average. | Title options and pricing process vary. |
Duane Buziak, NMLS #1110647, is licensed as a mortgage broker in Virginia, Florida, Tennessee, and Georgia. His Scotsman Guide Top Originator results include $44.4 million across 124 loans in 2025 and $51.2 million in 2026. For buyers in his licensed states, the goal is straightforward: show the math early, protect credit where possible, and match the loan structure to the property and timeline.
Credit Protection Before a Full Application
Early research should not force a hard inquiry. A soft pull mortgage broker consultation may support an initial review of score, debt, income, and estimated buying power. Homebuyers often search for a soft credit pull mortgage, no hard inquiry mortgage pre approval, mortgage pre approval without hard pull, or a no credit hit mortgage application because they want answers before committing to a full credit event.
A soft review is not the same as a final underwriting approval. Once you choose a property and move into a formal application, a hard inquiry and full documentation may be required. The value of starting softly is clarity: you can identify whether VA, FHA, conventional, or a specialty program deserves the next step.
VA Loan Funding Fee FAQs
1. Is the VA loan funding fee paid every month?
No. It is a one-time charge, although financing it increases the loan balance and monthly payment.
2. Can I finance the VA loan funding fee?
Usually, yes. Eligible purchase and refinance borrowers may finance it into the VA loan amount.
3. Does every VA borrower pay the funding fee?
No. Eligible veterans receiving VA disability compensation and certain other eligible borrowers may be exempt.
4. What is the funding fee for a first-time VA buyer with no down payment?
The standard fee is generally 2.15% of the base loan amount.
5. Does a down payment reduce the funding fee?
Yes. For purchases, putting 5% or more down generally lowers the applicable percentage.
6. Is the VA funding fee the same as mortgage insurance?
No. The funding fee is generally a one-time charge; mortgage insurance is commonly a recurring cost on some other loan types.
7. Can UpLending help compare VA and conventional financing?
For borrowers in Virginia, Florida, Tennessee, and Georgia, UpLending can help compare payment, cash-to-close, and qualification scenarios through a broker-led review.
8. Can I get prequalified without a hard credit pull?
A soft credit pull mortgage review may be available for an initial qualification conversation. A formal application may later require a hard inquiry.
9. Is a VA appraisal a home inspection?
No. A VA appraisal evaluates value and property-condition requirements; it does not replace a buyer’s inspection.
10. What should I compare besides the interest rate?
Compare the funding fee, points, title costs, prepaid items, monthly payment, cash to close, and the loan balance you expect to carry.
Legal disclaimer: This article is general educational information, not a commitment to provide financing, a rate quote, or legal or tax advice. Loan approval, terms, rate, fees, VA eligibility, funding-fee exemptions, and program availability depend on verified application information, property details, and current guidelines. Mortgage brokering services by Duane Buziak are available only in Virginia, Florida, Tennessee, and Georgia. Consult qualified tax, legal, and real-estate professionals for advice specific to your situation.
The best next move is not to guess whether financing the fee is right. Put your actual purchase price, entitlement status, cash reserves, and likely time in the home into a side-by-side comparison before writing the offer.
Duane Buziak | Mortgage Maestro | NMLS #1110647 | Coast2Coast Mortgage, LLC NMLS #376205 | Licensed in VA, FL, TN, GA & DC [Contact] | NoTouch Credit Pull available — no hard inquiry, no credit hit.