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2026 VA Funding Fee: Rates, Exemptions & When 5% Down Beats Zero Down

By John Kleopoulos, Mortgage Loan Originator, NMLS #2686219 | Loan Factory, Inc., NMLS #320841 | Last reviewed October 14, 2026

The short answer: In 2026 the VA funding fee is 2.15% of the loan amount for a first-time VA purchase with less than 5% down, 3.30% for any later use with less than 5% down, 1.50% with 5–9.99% down, and 1.25% with 10% or more down. Veterans receiving VA disability compensation pay nothing. On the median Brevard home, that’s about $8,100 on a first zero-down purchase and about $12,400 on a second one — and on that second one, putting 5% down cuts the fee by roughly $7,000, which is one of the best returns on cash a veteran buyer can get.

Most funding fee articles stop at the chart. The chart is easy. What I want you to walk away with is the math on when a down payment is worth it, what the fee really costs you once it’s financed over 30 years, and the exemption and refund rules that put real money back in Space Coast veterans’ pockets every month at my desk.

Key numbers (as of October 14, 2026)

  • Purchase and construction loans, first use: 2.15% with less than 5% down; 1.50% with 5% to 9.99% down; 1.25% with 10% or more down. — VA.gov
  • Purchase and construction loans, subsequent use: 3.30% with less than 5% down; 1.50% with 5% to 9.99% down; 1.25% with 10% or more down. — VA.gov
  • Cash-out refinance: 2.15% first use, 3.30% subsequent use, regardless of equity. — VA.gov
  • IRRRL (streamline refinance): 0.50%, first or subsequent use. — VA.gov
  • Rates in effect since: April 7, 2023, unchanged for 2026, and set by law through November 14, 2031. Regular military, Guard and Reserve all pay the same rates. — VA.gov; Blue Water Navy Vietnam Veterans Act of 2019
  • Brevard median single-family price: $376,018 (August 2026). — Space Coast Association of REALTORS data

What the funding fee is and why it exists

VA loans have no down payment requirement and no monthly mortgage insurance. The trade is a one-time funding fee paid to the VA at closing, which funds the guarantee that lets lenders make zero-down loans. Almost every VA borrower pays it unless they’re exempt, and almost everyone finances it into the loan rather than paying cash.

Two things about the fee that are easy to miss:

  • It’s calculated on the loan amount, not the purchase price. So a down payment lowers the fee twice: once by dropping the percentage, and again by shrinking the number it’s applied to.
  • “Subsequent use” means any prior VA loan, ever — even one you paid off and had your entitlement fully restored on. The one exception: if your only prior VA loan was for a manufactured home, you still get first-use pricing.

What the fee costs on a Brevard purchase

Using the August 2026 median price of $376,018 and a zero-down purchase:

  • First use, zero down: 2.15% × $376,018 = about $8,084. Financed, your loan becomes about $384,100.
  • Subsequent use, zero down: 3.30% × $376,018 = about $12,409. Financed, your loan becomes about $388,400.
  • The gap between first and second use: about $4,325 on the same house.

Now the part the chart doesn’t show. When you finance the fee, you pay interest on it for 30 years. At a 7.40% rate (the Freddie Mac national average on October 8, used here only as a reference), an $8,084 financed fee costs about $56 a month and roughly $20,100 in total payments over the life of the loan. A $12,409 financed fee runs about $86 a month and roughly $30,900 over 30 years. That’s the real price of the fee, and it’s why the exemption and the 5%-down option deserve more attention than they get.

When putting 5% down pays off

Here’s the comparison I run with every VA buyer who has some cash saved. Same $376,018 house.

First-use buyer:

  • Zero down: fee $8,084. Loan about $384,100.
  • 5% down ($18,801): base loan $357,217, fee drops to 1.50% = about $5,358. Loan about $362,600.
  • Fee saved by putting 5% down: about $2,726. That’s an immediate 14.5% return on the $18,801 you put down, before you count the lower monthly payment (about $150 a month less in P&I at 7.40%) or the equity you start with.

Subsequent-use buyer:

  • Zero down: fee $12,409. Loan about $388,400.
  • 5% down ($18,801): base loan $357,217, fee drops to 1.50% = about $5,358. Loan about $362,600.
  • Fee saved by putting 5% down: about $7,051. That’s a 37.5% immediate return on the $18,801 down payment. Plus about $180 a month less in P&I.

Read that again if you’re on your second VA loan. The subsequent-use fee at zero down is 3.30%; at 5% down it’s 1.50%. The down payment cuts the fee by more than half and shrinks the base it’s applied to. If you have 5% available and it doesn’t drain your reserves, it’s almost always the right call on a second VA purchase. On a first purchase, it’s a closer decision that depends on what else that $18,801 could do.

What about 10% down? The fee drops only another quarter point, to 1.25%. On $376,018, the difference between 5% and 10% down is about $1,000 in fee savings for another $18,800 in cash. The 5% tier is where most of the value is; 10% is a payment decision, not a fee decision.

From my files: The most common version of this on the Space Coast is a retired E-7 or O-4 who bought at a previous duty station with their first VA loan, sold it, and is now buying in Viera or Melbourne Beach with proceeds in the bank. They assume zero down is the point of VA. For them, 5% down saves $6,000 to $8,000 in fee on a $350,000–$400,000 house, and they still have cash left. It’s the easiest money I find for anyone all year.

Who is exempt from the funding fee

You pay no funding fee at all — on any VA loan type — if you are:

  1. A veteran receiving VA compensation for a service-connected disability. Any rating, including 10%.
  2. A veteran who is eligible for VA disability compensation but is receiving retirement or active-duty pay instead.
  3. A surviving spouse of a veteran who died in service or from a service-connected disability, receiving Dependency and Indemnity Compensation (DIC).
  4. An active-duty service member who has received a Purple Heart, with the award documented before closing.
  5. A service member with a proposed or memorandum rating for a service-connected disability from a pre-discharge claim, before closing.

Your exemption status appears on your Certificate of Eligibility. Lenders rely on the COE, so if your rating is pending or recently changed, tell your loan officer early so the disclosures and the closing figures match.

On the median Brevard home, the exemption is worth $8,084 on a first purchase or $12,409 on a second one — and $20,000 to $30,000 over 30 years once you count the interest you’re not paying on it. If you have any service-connected rating and you’re being charged a fee, stop and ask why.

Refunds: when the VA owes you money back

This one is underused. If you paid the funding fee and later receive a disability rating with an effective date before your loan closed, you’re entitled to a refund of the fee. This happens constantly with service members who separate, buy a house, and get their rating decision months later with an effective date back to their separation date.

Contact your loan servicer or the VA Regional Loan Center and ask for the funding fee refund process. If the fee was financed, the refund is typically applied to your loan balance, though it can sometimes be paid to you directly. If you closed in the last few years and got a rating afterward, check your effective date; there may be $8,000 to $12,000 sitting there.

Three ways to pay the fee without paying it yourself

  1. Seller concession. VA allows the seller to pay the funding fee as part of the 4% concession limit. In a Brevard market with 40 days on market and 3.5 months of supply, this is a normal ask, not an aggressive one. Your agent should know how to structure it.
  2. Lender credit. A slightly higher rate in exchange for a credit toward closing costs, which can cover some or all of the fee. Whether it’s worth it depends on how long you’ll keep the loan; I’ll run the break-even.
  3. Finance it. The default. Your loan amount goes up by the fee, your payment goes up by $55 to $90 a month at today’s rates, and you bring no extra cash to closing. The right move if cash is tight; the expensive move over 30 years.

Frequently asked questions

Did the VA funding fee change for 2026?
No. The current rates took effect April 7, 2023, are unchanged for 2026, and are set by law through November 14, 2031.

Do National Guard and Reserve members pay a higher fee?
Not anymore. Since January 2020, regular military, Guard and Reserve all pay the same funding fee rates. Older articles still show separate columns; ignore them.

Can I use VA entitlement twice and still pay the first-use fee?
Only if your prior VA loan was for a manufactured home. Otherwise, any previous VA loan — even one paid off years ago with entitlement restored — makes your next one “subsequent use” at 3.30% with less than 5% down.

Is the funding fee tax-deductible?
It has been treated as mortgage insurance for federal tax purposes in some years, and the rules changed in 2025. I’m not a tax professional; ask your CPA what applies for the year you close.

Does the funding fee apply to a VA cash-out refinance?
Yes: 2.15% for first use and 3.30% for subsequent use, regardless of how much equity you have. That’s a big reason a VA IRRRL (0.50%) is usually the better refinance if you don’t need cash out.

I’m rated 10%. Am I really fully exempt?
Yes. Any compensable service-connected rating exempts you from the entire funding fee on every VA loan type.

Sources

Fee calculations use the August 2026 Brevard median price for illustration. Monthly and lifetime cost figures use Freddie Mac’s published national average for conventional loans as a reference rate; VA rates are priced separately and these are not rates or terms offered by Loan Factory or John Kleopoulos. Your fee, rate and payment depend on your loan amount, down payment, entitlement history, exemption status and lender, and the rate may change or not be available at commitment or closing. This is general information, not a loan offer, tax advice or financial advice.

Want me to check your funding fee, exemption and down payment options?

Send me your COE (or I’ll pull it), the price range you’re looking at, and what you have available for a down payment. I’ll show you the fee at zero, 5% and 10% down, confirm whether you’re exempt, flag a refund if you’re owed one, and shop the loan across my VA lenders so the rate is as good as the fee. I work weekends, because that’s when you’re out looking.

Book a call · Start a secure application (opens Loan Factory’s secure borrower portal, a separate site)

John Kleopoulos, NMLS #2686219. Loan Factory, Inc., NMLS #320841. Florida License LO-150890. Equal Housing Opportunity. This article is for educational purposes only and is not a commitment to lend, an offer of credit, or financial advice. Programs, rates, terms and conditions are subject to change without notice and to borrower and property qualification. Not all applicants will qualify. Loan Factory and John Kleopoulos are not affiliated with, endorsed by, or acting on behalf of the U.S. Department of Veterans Affairs or any government agency. VA loans are made by private lenders and guaranteed by VA. The $2,000 Best Price Guarantee is subject to the terms and conditions at loanfactory.com/best-price-guarantee.

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