VA Loan Costs and the Funding Fee

This is one piece of a larger guide. For the full picture of buying and selling with a VA loan in Kansas City, start at our veterans hub.

Joe walks through this on video: The Hidden VA Loan Cost That’s Putting Veterans Upside Down in 2026.

What is the VA funding fee and why does it exist?

It is a one time fee paid to the VA that keeps the loan program running without taxpayer subsidy, and it is the tradeoff for a mortgage with no down payment and no monthly mortgage insurance. Every other low down payment loan charges you monthly, forever or close to it. The VA charges once.

That distinction is worth sitting with, because it is where most of the confusion starts. An FHA borrower pays an upfront premium and then a monthly premium that in many cases never comes off. A conventional borrower putting less than 20 percent down pays PMI every month until they reach the equity threshold. A VA borrower pays the funding fee at closing and then pays nothing monthly for the life of the loan. Over a normal holding period that math usually favors the VA loan even when the funding fee looks large on paper.

What is the VA funding fee in 2026?

On a purchase with no down payment it is 2.15 percent of the loan amount for first time use and 3.3 percent for every use after that. Putting money down lowers it. Here are the current rates, which the VA set effective April 7, 2023 and has not changed since.

• First use, less than 5 percent down: 2.15 percent
• After first use, less than 5 percent down: 3.3 percent
• 5 percent or more down, first or subsequent use: 1.5 percent
• 10 percent or more down, first or subsequent use: 1.25 percent
• Interest Rate Reduction Refinance Loan, the IRRRL: 0.5 percent
• Cash out refinance: 2.15 percent first use, 3.3 percent after
• Assuming an existing VA loan: 0.5 percent

These are percentages of the loan amount, not the purchase price, and they change by regulation rather than on a schedule. Check the current figures on the VA’s own funding fee page before you rely on any number, including these.

Notice the jump from 2.15 to 3.3 on subsequent use with nothing down. On a $350,000 loan that difference is real money, and it is one of the reasons we look at whether a small down payment makes sense for a repeat user. Dropping to 5 percent down cuts the fee to 1.5 percent, which on a second use is less than half.

Who is exempt from the VA funding fee?

You pay nothing if you fall into one of five categories the VA defines, and the first one covers most of the veterans I work with. The VA’s exemption list is:

• You are receiving VA compensation for a service connected disability
• You are eligible to receive VA compensation for a service connected disability but you receive retirement or active duty pay instead
• You are a surviving spouse receiving Dependency and Indemnity Compensation
• You are an active duty service member with a proposed or memorandum rating showing eligibility for disability compensation before your loan closes
• You are an active duty service member who provides evidence of a Purple Heart on or before your loan closing date

There is no minimum rating. A 10 percent rating exempts you exactly the same as a 100 percent rating does. I have had clients assume that a low rating did not count and pay a fee they never owed, which is a bad way to find out.

Your exemption status shows on your Certificate of Eligibility, which is one of several reasons we pull it before writing an offer rather than after. If you have not pulled yours yet, our guide to VA loan eligibility and the COE covers the four ways to do it.

Can I get the VA funding fee refunded after closing?

Yes, if your VA disability compensation was later awarded with an effective date that falls before your loan closing date. That single date is the whole test. The VA states it plainly: to qualify for a refund, the effective date of your VA compensation must be retroactive to before the date of your loan closing.

This matters enormously to anyone who bought while a claim was still pending, which is a common situation for people separating or retiring. Claims take months. Closings do not wait. So a veteran closes in March, pays the fee, gets rated in September, and the award letter shows an effective date in January. That fee should come back.

The reverse case is the one to understand before you get your hopes up. If you receive a proposed or memorandum rating after your loan closes, you are not eligible for a refund on that basis. The effective date has to predate the closing, not the rating decision. We keep a dedicated walkthrough of the whole process at how to get a VA funding fee refund, and that is the page to work from if you think you have a claim.

How do I actually get the funding fee back?

You start with your loan servicer, not with the VA, and you go in with the award letter in hand. Confirm that the effective date on your VA award letter falls before the closing date on your settlement statement, then ask the servicer holding your loan to submit a funding fee refund request to the VA.

A refund is still available if you financed the fee into your loan rather than paying it in cash. In that case it typically comes back as a principal reduction rather than a check, which is worth less to your bank account today but is still money you were not going to see otherwise.

The full step by step, including what goes in the packet and how to escalate when a servicer stalls, lives on our VA funding fee refund guide. If you are separating or retiring with a claim still pending, using a VA loan as a retiring veteran covers the timing problem from the other direction.

What closing costs does a veteran actually pay?

The funding fee is one line on a settlement statement that has many. The VA caps what a lender can charge you in origination at a one percent flat charge, and the remaining costs are the ordinary ones any buyer sees: appraisal, title, recording, prepaid taxes and insurance, and any discount points you choose to buy.

One structural rule catches people. On a purchase loan you can finance only the VA funding fee into the loan amount. Every other fee and charge has to be paid at closing. That is a real cash flow constraint on a no down payment purchase, and it is why “zero down” does not mean “zero dollars.” We build that number for clients before they start looking rather than at the closing table. Our page on VA loan closing costs in Kansas City breaks the individual lines down further.

How much can a seller pay toward my closing costs?

The VA allows seller concessions of up to 4 percent of the loan amount, and that is the single most underused tool in a VA purchase. Concessions can cover closing costs, discount points and other items, which on a typical Kansas City purchase is enough to move most or all of a buyer’s cash to close onto the seller’s side of the sheet.

Whether a seller agrees is a negotiation, not an entitlement, and in a tight market it costs you elsewhere. But the ceiling is higher than most listing agents realize, and part of our job on the buy side is making sure the other agent understands what is actually allowed rather than what they assume. On the pricing side, concessions are one of the levers that keeps a VA offer competitive without raising the price.

Proof from our own files: in De Soto, Kansas, two veterans we represented in 2026 needed the seller to cover most of their closing costs on a listing that was two days old and had competing interest. The offer was raised so the price carried the costs, the neighborhood comparables supported it, and the VA appraisal came in at the contract price. Here is how that purchase went.

Who this applies to and who it does not

These figures apply to VA backed purchase, refinance and assumption transactions. They do not apply to conventional, FHA or USDA loans, which have their own fee structures.

A few honest limits. The funding fee percentages here are current as of the date at the bottom of this page and they change by regulation, so treat any number you read anywhere, including here, as something to verify against the VA before you sign. Exemption status is determined by the VA and reflected on your COE, not by a lender’s judgment and not by mine. A refund claim depends entirely on the effective date the VA assigns to your award, which is outside anyone’s control here. And none of this addresses whether a VA loan is the right tool for your situation in the first place. Sometimes it is not, and our comparison of the pros and cons of VA loans is the more honest starting point if you are not sure.

Frequently asked questions about the VA funding fee

Equal Housing Opportunity

Nelson Home Group is committed to the Fair Housing Act. We do not discriminate on the basis of race, color, national origin, religion, sex, familial status, or disability. School district and neighborhood information on this page is provided for factual informational purposes only and does not constitute a recommendation to purchase in any particular area. All buyers are encouraged to independently research neighborhoods, schools, and communities to determine the best fit for their individual needs.

Joe Nelson is a licensed Realtor in Missouri and Kansas, and a licensed mortgage originator in Missouri and Kansas (NMLS #2547018). Joe cannot serve as both Realtor and loan officer on the same transaction. This page is educational and is not an offer of credit or a commitment to lend. Loan products, rates and qualification are subject to underwriting and may change. Funding fee exemption and refund determinations are made by the U.S. Department of Veterans Affairs.