If you’re planning to use 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 as part of your closing costs by rolling it into your loan (financing) or paying it at the closing table as a lump sum. Your lender can discuss these options with you.

The VA funding fee is calculated as a percentage of your total loan amount and is a one-time payment made to the Department of Veterans Affairs (VA) at the close of your loan. This fee helps to keep the VA Loan program self-sustaining, enabling it to offer competitive interest rates and up to zero-down financing. Additionally, the fee helps reduce the cost to taxpayers, who would otherwise cover the cost of reimbursing mortgage lenders if a borrower defaults.

Related: Cash-Out Refinance vs HELOC – Which Is Right for Me?

How Much Is the Fee and Who Pays It?

How much you’ll pay for the VA funding fee depends on your loan type, down payment, and a few other variables (see tables below for details). The first time you take out a VA Home Loan, the funding fee is 2.15% for first-time borrowers with a down payment of less than 5%. The fee is 1.5% for first-time borrowers with a down payment between 5% and 10%. The fee is 1.25% for first-time borrowers with a down payment of 10% or more. However, as you can use your entitlement multiple times, it’s not uncommon for someone purchasing for a second time to put 5% down and save more than a point-and-a-half (1.8%) in funding fees.

There are some exemptions for having to pay the funding fee. For example, Veterans with a 10% or higher VA disability rating and Purple Heart recipients on active duty. Also, previously, National Guard and Reservists paid higher funding fees than active-duty servicemembers, but this distinction has been eliminated so all military members now pay the same rates. Plus, you may be eligible for a refund of the VA funding fee if you are awarded VA compensation for a service-connected disability. (If you are eligible for a refund, please call the VA Regional Loan Center at 877-827-3702.)

2025 VA funding fee rates for purchase and construction loans:

Down Payment	First-Time Use	After First Use
Less Than 5%	2.15%	3.3%
5% or More	1.5%	1.5%
10% or More	1.25%	1.25%

It’s important to note that these fee percentages are reviewed periodically by the VA and may be adjusted by the agency based on the financial needs of its loan program and ensure the program’s long-term viability. For example, the Blue Water Navy Vietnam Veterans Act of 2019 caused the VA funding fee to rise from 2.15% to 2.30% for first-time borrowers and from 2.40% to 3.60% for those who have previously used a VA Home Loan.

Related: Saving $250 Month with a VA IRRRL Streamline Refinance

The Funding Fee and Refinances

The funding fee will apply when AAFMAA Members refinance loans with a VA refinance loan, although the percentage charged can vary based on the type of refinance and whether the Member has used the VA Loan program before.

First, there are two primary types of VA refinance loans: the VA Interest Rate Reduction Refinance Loan (IRRRL) and the VA Cash-Out Refinance. With IRRRLs, the VA funding fee will typically be much lower than what is charged for a purchase loan — only 0.5% of the loan amount, regardless of whether this is your first use of your VA Loan entitlement or a subsequent use. The funding fee charged for a cash-out refinance, however, is the same as the amount charged for a purchase loan (see chart for details).

Loan Type	First-Time User	Repeat User
VA IRRRL	0.50%	0.50%
VA Cash-Out Refinance	2.15%	3.30%

The VA also offers loans for less common lending scenarios than purchasing or refinancing your home. This can include buying a manufactured home (mobile home) or assuming a home loan.

Those fees look like this:

Loan Type	First-Time User	Repeat User
Manufactured Homes	1.00%	1.00%
VA Home Loan Assumptions	0.50%	0.50%
Buying a VA-Owned Property	2.25%	2.25%
Native American Direct Loan	1.25%	0.50%

We’re Here to Help

Whether you’re thinking about buying, ready to start home-shopping in earnest, or considering a refinance, an AAFMAA Mortgage Services LLC (AMS) Military Mortgage Advisor, a licensed mortgage loan originator, will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.

Ensuring AAFMAA Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-422-3622!