What Is the VA Funding Fee? A Simple Guide for VA Buyers

by Tomell Johnson

When it comes to VA loans, one of the least discussed aspects is the VA funding fee. It’s not just a line item in your closing costs—it’s a key part of how the VA loan program stays sustainable for future veterans.

Let’s break it down:
What is it, why does it exist, how much is it, can you avoid it—and what happens when you sell?

What Is the VA Funding Fee?

The VA funding fee is a one-time cost required on most VA loans. It’s paid directly to the Department of Veterans Affairs—not your lender—and helps fund the program so it can continue supporting veterans with powerful benefits like:

No down payment
No private mortgage insurance (PMI)
Competitive rates

It replaces monthly PMI, which can save you hundreds every month.

How Much Is It?

The exact amount depends on:

Your down payment (if any)
Whether this is your first or subsequent use of a VA loan
The type of loan (purchase, cash-out refi, streamline refi)
Whether you’re exempt from the fee

Here’s a quick snapshot for purchase loans:

Example:
Buying a $400,000 home with 0% down on a first-time VA loan? Your VA funding fee would be $8,600.

Can You Roll the Funding Fee Into the Loan?

Yes—and most VA buyers do. You don’t have to pay it out of pocket at closing.

Using the same example:

Home price = $400,000
VA funding fee (2.15%) = $8,600
Total loan amount = $408,600 if you roll the fee in

This keeps your upfront cash low and spreads the cost over the life of your loan.

Who’s Exempt From the VA Funding Fee?

You may not have to pay it at all if:

You receive VA disability compensation (even 10%)
You’re eligible for compensation but receiving retirement pay instead
You’re a surviving spouse of a service member who died in the line of duty or from a service-connected disability

📌 Your Certificate of Eligibility (COE) will show your exemption status. Ask your lender to review it early in the process.

What Happens When You Sell?

Great question—and an important one.

The VA funding fee isn’t refundable unless you become eligible for an exemption retroactively. But when you sell your home:

The loan is paid off in full—including the funding fee
There’s no penalty or extra fee at closing
Your equity is based on your home’s value minus the total loan balance (which includes the funding fee)

So if you bought for $400K and rolled in the $8,600 fee, your loan payoff is $408,600. If you sell for $450K, you keep the difference after typical closing costs.

Bottom line: The fee affects your loan amount and amount of equity—not your home’s value or resale.

The Takeaway

The VA funding fee is a small price to pay for one of the most powerful loan programs available. It eliminates the need for PMI, allows for 100% financing, and opens the door to homeownership for those who’ve served but, it does impact your homes equity and you Net proceeds when you sell.

Whether it’s your first home or your next chapter, let’s make sure you’re maximizing your benefits and planning smart.

📞 Ready to run your numbers or check your eligibility? Let’s connect—I’m here to guide you every step of the way.