The VA loan’s headline benefits — zero down, no PMI — are real. But there’s one cost almost every VA buyer encounters: the funding fee. Here’s exactly what it is in 2026, who skips it entirely, and how to keep it as low as possible.
What the funding fee is. It’s a one-time fee paid to the VA that keeps the loan program self-sustaining, so the program doesn’t lean on taxpayers. It replaces the monthly private mortgage insurance (PMI) you’d pay on a conventional loan — and unlike PMI, it’s a single charge, not a forever line item.
2026 purchase rates. The fee depends on your down payment and whether it’s your first use or a subsequent use: – Less than 5% down: 2.15% first use / 3.30% subsequent use – 5% to 9.99% down: 1.50% for everyone – 10% or more down: 1.25% for everyone
On a $300,000 loan, that’s $6,450 at first use with zero down, dropping to $4,500 with 5% down. For a VA streamline refinance (IRRRL), the fee is just 0.50%.
Who’s exempt — this is the big one. If you receive VA disability compensation for a service-connected disability rated 10% or higher, you are exempt from the funding fee entirely. Surviving spouses receiving dependency and indemnity compensation are generally exempt as well, as are certain Purple Heart recipients. On a typical purchase, that exemption is worth roughly $4,300 to $10,000. If you have a disability rating and a lender is charging you the fee, stop and verify — this gets missed.
How to legitimately lower it. Three levers: 1. Put a little down. Going from 0% to 5% down on a $300,000 loan drops the fee from 2.15% to 1.50% — about $1,950 saved. Weigh that against keeping cash in reserve. 2. Confirm your exemption status early. Get your disability rating documented in the loan file from day one. 3. Use first-use rates while you can. If you’re planning multiple purchases over a career, the first-use rate is meaningfully lower than subsequent-use.
Financing the fee. You can usually roll the funding fee into the loan amount instead of paying cash at closing — most borrowers do. Just know it raises your loan balance and monthly payment slightly. (Note: most other closing costs can’t be financed on a purchase loan, only the funding fee.)
Keep your Closing Disclosure. It shows the exact fee you paid, which matters for your records — and starting with tax year 2026 there’s renewed discussion about deductibility, which depends on your tax situation, so hang onto the document and talk to a tax professional.
The honest framing. A VA loan is “$0 down,” but it’s not “$0 to close.” Between the funding fee and standard third-party costs, expect total closing-related costs somewhere in the 2–5% range of the loan amount in 2026, depending on your fee status and market. A good lender shows you the whole picture up front — no surprises at the table.
How much is the VA funding fee in 2026? For purchases with less than 5% down: 2.15% first use, 3.30% subsequent use. It drops to 1.50% with 5%+ down and 1.25% with 10%+ down. The IRRRL streamline refinance fee is 0.50%.
Who is exempt from the VA funding fee? Veterans with a service-connected disability rating of 10% or higher, many surviving spouses, and certain Purple Heart recipients are exempt entirely.
Can I roll the VA funding fee into my loan? Yes. You can finance the funding fee into the loan amount instead of paying cash at closing, which raises your balance and payment slightly.