How the VA funding fee is determined

The VA funding fee is a one-time charge that keeps the VA home loan program self-funded — no taxpayer appropriation required. The fee is calculated as a percentage of the loan amount and varies based on three factors: loan type (purchase, cash-out refinance, or interest rate reduction refinance), down payment amount, and whether it is your first or subsequent use of the VA loan benefit.

For purchase loans, first-time VA loan users with no down payment pay a lower rate than subsequent users. Adding a down payment of 5% or more reduces the fee; 10% or more reduces it further. The fee can be paid in full at closing or financed into the loan amount — if financed, it increases your principal and therefore your monthly payment.

Certain borrowers are exempt from the funding fee entirely: veterans receiving VA disability compensation, surviving spouses of veterans who died in service or from a service-connected disability, and active-duty service members who have received a Purple Heart. This calculator applies the correct rate based on your inputs and shows the dollar impact of both paying at closing and financing.

Source: VA Lender's Handbook M26-7, Ch. 8 — Borrower Fees and Charges and the VA Funding Fee