Duane Buziak Teaches: VA Funding Fee Checklist for 2026 Buyers
A VA loan can put a qualified veteran or active-duty buyer into a home with Zero Down and no monthly mortgage insurance. That does not mean every closing cost disappears. This VA funding fee checklist helps you identify the one-time VA charge, determine whether you are exempt, and decide whether paying or financing it makes the most sense before a PCS deadline or contract closing puts pressure on the decision.
Duane Buziak, NMLS #1110647, works from the borrower side of the table as an independent mortgage broker. The goal is simple: verify the benefit, shop the available wholesale options, and make sure the numbers match the plan before you sign.
Table of Contents
- What the VA funding fee pays for
- VA funding fee checklist before you apply
- Current fee categories and exemptions
- A worked payment example
- VA compared with conventional and FHA financing
- Questions to ask before closing
- Frequently asked questions
What the VA Funding Fee Pays For
The VA funding fee is a one-time charge established by the U.S. Department of Veterans Affairs. It helps support the VA home loan guaranty program so eligible borrowers can use favorable financing terms without a down payment or monthly private mortgage insurance.
The fee is not the same as prepaid taxes, homeowners insurance, title charges, appraisal charges, or other settlement costs. It is also not an interest charge. In most purchase and refinance situations, an eligible borrower can finance the funding fee into the new VA loan balance. That reduces cash needed at closing, but it increases the amount borrowed and the monthly principal-and-interest payment.
For the official schedule and exemption rules, review VA.gov. For broad mortgage disclosures and consumer guidance, CFPB and HUD.gov are useful government resources. FHFA and Fannie Mae also publish market and housing-finance information, although neither sets VA funding fee policy.
Your VA Funding Fee Checklist
Start with your Certificate of Eligibility, often called a COE. It confirms entitlement and can show whether the VA records you as exempt from the funding fee. Do not assume a disability-related exemption applies just because you have a VA disability rating. The COE and your current VA status control the answer for the transaction.
Next, identify the transaction type. A first-use VA purchase, subsequent-use purchase, Interest Rate Reduction Refinance Loan, and VA cash-out refinance can carry different fee rules. Your down payment also matters on many purchase loans. A 5% or 10% down payment can reduce the fee, so compare the fee savings against the cash you would otherwise keep in reserve for moving, repairs, or a PCS transition.
Then confirm your usage history. “First use” generally refers to whether you have used a VA-backed home loan before, not whether this is your first home purchase. A prior VA loan that was paid off can still make a future transaction a subsequent use for funding-fee purposes.
Finally, choose how the fee will be handled. You may finance it when permitted or pay it in cash. Financing preserves cash, while paying it upfront reduces the loan amount. Neither answer is automatically better. A borrower with a tight relocation budget may reasonably prioritize cash reserves; a borrower focused on the lowest possible payment may prefer to pay the fee at closing.
Common exemptions to verify
The VA generally exempts veterans receiving VA compensation for a service-connected disability, veterans entitled to compensation but receiving retirement pay instead, certain surviving spouses, and active-duty Purple Heart recipients. Documentation and timing matter. If your status changes after closing, the VA may allow a refund in limited circumstances, but do not build a homebuying plan around a possible later refund. Get the COE reviewed before the loan is structured.
Know the Fee Before You Make an Offer
For many VA purchase loans, the funding fee depends on down payment and prior VA loan use. Under the schedule in effect for standard purchase and construction loans, a first-use borrower putting less than 5% down generally pays 2.15% of the base loan amount. With 5% to less than 10% down, the fee is generally 1.5%; with 10% or more down, it is generally 1.25%.
For subsequent use, the less-than-5%-down fee is generally 3.3%, while the 5% to less-than-10% and 10%-or-more tiers are generally 1.5% and 1.25%. VA IRRRL transactions generally use a 0.5% funding fee. A cash-out refinance commonly follows the first-use or subsequent-use structure. Confirm the applicable schedule with your broker because VA policy, loan purpose, and borrower status determine the final figure.
A local price point makes this real. Virginia REALTORS reported a statewide median sales price of $420,000 for 2024. At that price level, a funding fee is not a rounding error. It deserves the same attention you give the rate, seller credits, and property condition.
Worked Dollar Example: Financing the Fee
Assume a first-time VA buyer purchases a Virginia home for $400,000 with Zero Down. The buyer is not exempt and uses a first-use purchase funding fee of 2.15%.
The base loan amount is $400,000. The funding fee is $400,000 × 0.0215 = $8,600. If the buyer finances the fee, the total loan amount becomes $408,600.
At a hypothetical 6.25% fixed interest rate for 30 years, the estimated monthly principal-and-interest payment on $408,600 is about $2,515. The estimated principal-and-interest payment on $400,000, if the $8,600 fee were paid in cash, is about $2,463. Financing the fee adds about $52 per month in this example, before property taxes, homeowners insurance, HOA dues, or any other payment items.
That is the math borrowers deserve to see. A lower rate, a seller contribution toward permitted costs, or a different cash-reserve strategy may change the best choice. Ask about no-out-of-pocket closing options if preserving cash is the priority, but review the full loan estimate instead of treating any option as free.
VA Loans Compared With Conventional and FHA
| Feature | VA Purchase Loan | Conventional Purchase Loan | FHA Purchase Loan |
|---|---|---|---|
| Minimum down payment | 0% for eligible borrowers with sufficient entitlement | Often 3% to 5%, depending on program and qualification | Usually 3.5% for qualified borrowers |
| Monthly mortgage insurance | No monthly PMI | Usually required below 20% equity | Annual mortgage insurance premium generally applies |
| Upfront program charge | VA funding fee unless exempt | No VA funding fee | Upfront mortgage insurance premium generally applies |
| Interest rate | Pricing varies by credit, occupancy, loan terms, and market | Pricing varies by credit, down payment, loan terms, and market | Pricing varies by credit, loan terms, and market |
| Eligibility | Military service eligibility and VA requirements | Broad borrower eligibility | Broad borrower eligibility with FHA requirements |
The comparison is not a contest with one universal winner. Conventional financing can make sense for a buyer with a large down payment, strong pricing, and no desire to use VA entitlement. FHA can serve borrowers who do not meet VA eligibility. For an eligible service member, however, the combination of Zero Down and no monthly PMI makes VA financing difficult to dismiss without a side-by-side payment review.
Questions to Ask Before You Close
Ask for the base loan amount, funding-fee percentage, dollar fee, and final financed balance in writing. Ask whether the COE shows exemption status. Ask whether a lower fee is available through a larger down payment, and ask how that choice affects your cash position after closing. If you are refinancing, ask whether the transaction type is correctly identified as an IRRRL or cash-out refinance.
VA Loans Pro can start with a NoTouch Credit Pull, a soft-credit pre-approval process designed to help you explore financing without a hard inquiry. It is particularly useful when you need to understand buying power before a PCS move, but a full application and required verification will still be necessary before final approval.
Frequently Asked Questions
1. What is the VA funding fee?
The VA funding fee is a one-time charge on many VA-backed purchase and refinance loans. It supports the VA guaranty program and is often financed into the loan.
2. Can I avoid the VA funding fee?
Yes, if you qualify for a VA exemption. Your COE is the key document for confirming exemption status before closing.
3. Is the VA funding fee refundable?
It can be refundable in limited cases, such as when the VA later determines you were exempt as of the closing date. Confirm your current status first.
4. Does every VA buyer pay the same percentage?
No. The percentage can depend on loan purpose, prior VA loan use, down payment, and exemption status.
5. Can I finance the VA funding fee?
In many VA transactions, yes. Financing lowers the cash needed at closing but increases the loan balance and payment.
6. Does a VA funding fee replace closing costs?
No. The funding fee is separate from appraisal, title, prepaid items, and other settlement charges.
7. Does VA Loans Pro use a hard credit inquiry for every first conversation?
No. VA Loans Pro offers NoTouch Credit Pull options for initial pre-approval exploration without a hard inquiry. Final underwriting requires appropriate credit and documentation review.
8. Is VA Loans Pro legit?
VA Loans Pro is operated by Duane Buziak through Coast2Coast Mortgage, LLC. Duane Buziak is NMLS #1110647, and Coast2Coast Mortgage, LLC is NMLS #376205.
9. Can a VA loan work with a 500 FICO score?
VA Loans Pro works with VA loan scenarios down to 500 FICO, subject to complete underwriting, income, property, and program requirements. A score alone does not guarantee approval.
10. Should I pay the fee or finance it?
Compare the payment increase against your available cash after closing. The right answer depends on your reserves, moving costs, rate, and overall financial plan.
Your service earned this benefit. Use the checklist early, verify the COE before making assumptions, and make the funding-fee decision with the actual dollars in front of you.
Legal Disclaimer: This article is for educational purposes only and is not a commitment to lend, a loan approval, legal advice, tax advice, or financial advice. VA loan eligibility, funding-fee exemptions, rates, fees, credit requirements, underwriting standards, and program availability are subject to change and final approval. Equal Housing Opportunity.
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.