The Quick Read: A VA loan carries no monthly mortgage insurance at any down payment. The government guarantee takes its place, and the borrower pays a one-time funding fee instead, unless the borrower is exempt. A larger down payment lowers that fee, and the fee can be rolled into the loan. All figures are subject to lender guidelines and full file review.
Key Takeaways
- No monthly mortgage insurance on a VA purchase loan, with or without a down payment.
- The funding fee is a one-time charge based on the loan amount, not a recurring premium.
- Putting 5% down or 10% down moves the fee into a lower tier.
- Veterans receiving VA compensation for a service-connected disability are exempt, along with a few other groups.
- The fee can be financed. Other closing costs generally cannot.
Is There Mortgage Insurance on a VA Loan?
No. The CFPB explains that the VA guarantee replaces mortgage insurance and functions similarly, so there is no monthly premium on a VA-backed loan. Conventional private mortgage insurance, by contrast, is mostly paid monthly.
VA payment estimate
Starting assumptions reflect an example price with no down payment and a first-use funding fee. Replace them with your own figures.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a VA loan quote.
Illustrative starting assumptions: a $350,000 price, no down payment with full entitlement, a first-use funding fee financed into the loan, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a VA loan quote; your rate is set by the lender at lock. The funding fee follows VA’s published table for the use and down payment entered; the residual-income figure is VA’s guideline for the region and family size, and the rough residual shown subtracts only the housing payment and the debts entered, while VA also deducts taxes, maintenance and utilities. Taxes, insurance and dues are editable estimates; closing costs are not included. Licensed in sixteen states for consumer mortgages. Lendmire is not affiliated with or acting on behalf of the Department of Veterans Affairs.
Across the wholesale programs Lendmire places VA files with, the purchase structure is consistent. Financing runs to 100% with no down payment, as long as the price is not above the appraised value. There is no mortgage insurance of any kind. With full entitlement there is no VA loan limit. With remaining entitlement, a down payment may be required, and the right move is to speak with a loan officer rather than guess at a county figure.
Lendmire is a mortgage broker arranging VA loan programs through wholesale lenders. The lender reviews and approves the file. Nothing here is a commitment to lend.
The terminology trap
Borrowers search for “VA PMI” and “VA mortgage insurance” and land on the funding fee. They are not the same thing. PMI is a recurring premium that protects a conventional lender. The funding fee is a one-time charge that supports the VA program. Homeowners insurance, title insurance and flood insurance are separate items, and they apply to any loan type.
Funding Fee vs. Mortgage Insurance
| Feature | VA funding fee | Conventional PMI |
|---|---|---|
| Frequency | One time | Usually monthly |
| Financeable | Yes | Varies by structure |
| Waivable | Yes, for exempt groups | No |
| Down payment lowers it | Yes, on purchases | Yes, by lowering the premium tier |
| Recurring cost | None | Until removed |
The practical difference is the monthly budget. With a VA loan there is no insurance line in the payment. If the fee is financed, the balance is slightly larger, so the payment is slightly higher and more interest accrues over time. The CFPB confirms that rolling the fee in raises both the loan amount and the overall cost.
How a Down Payment Changes the Funding Fee
The fee depends on three inputs: the loan type, first or subsequent use, and the down payment tier. For a purchase, the schedule in VA Circular 26-23-06, Exhibit B works out as follows.
| Use | Under 5% down | 5% to under 10% down | 10% or more down |
|---|---|---|---|
| First use | 2.15% | 1.5% | 1.25% |
| Subsequent use | 3.3% | 1.5% | 1.25% |
The fee is a percentage of the loan amount, not the purchase price. That matters because a down payment helps twice. It moves the percentage into a lower tier, and it shrinks the amount the percentage is applied to.
The examples below illustrate the point plainly.
- A first-use borrower moving from under 5% down to 5% down drops the fee from 2.15% to 1.5%.
- A subsequent-use borrower sees a bigger drop, from 3.3% to 1.5%. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Cash-out refinances do not follow these tiers. Equity does not reduce the fee there.
Is a larger down payment worth it?
It depends on the file, and the answer is not the same for everyone. A down payment buys three things: a lower fee percentage, a smaller loan, and a smaller financed fee. It costs cash that could otherwise sit in reserves.
The decision usually breaks down by borrower profile:
1. Exempt borrower. Because this borrower is exempt, the fee does not enter the decision, so a down payment has no effect on a fee. Any down payment is a choice about loan size.
2. First use, limited cash. Zero down is available, and the fee is financeable. Keeping cash for reserves and moving costs is a legitimate call.
3. Subsequent use. The fee tier is steeper at under 5% down. This is where reaching the 5% tier changes the math most. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
4. Cash to spare. Reaching 10% down moves the fee to its lowest tier and reduces the balance. The tradeoff is how much liquidity stays behind after closing.
A loan officer can lay these side by side on a real file. Compare the fee percentage, the loan amount and the reserves left after closing, rather than looking at the fee alone.
Who Pays No Funding Fee?
The VA Buyer’s Guide lists the exempt groups:
- Veterans receiving VA compensation for a service-connected disability.
- Veterans entitled to that compensation who receive retirement pay or active service pay instead.
- Unremarried surviving spouses of Veterans who died in service or from a service-connected disability.
Service members with a pre-discharge claim pending can also qualify when a qualifying rating exists before closing. If the member is discharged without a rating, the exemption does not apply.
Pending claims and the closing table
Exemption has to be settled before closing. VA Circular 26-23-19 says status should be established before the loan closes. The lender relies on the funding fee status shown on the certificate of eligibility (COE). The COE from VA decides eligibility, and service requirements are VA’s rules.
Here is the catch. A borrower who believes they are exempt should not close first and sort it out later. If the status is not verified at closing, the file is treated as non-exempt. Anyone with a rating decision in motion should raise it at the start of the file, not the end.
How the Fee Gets Paid
The borrower can pay the fee in cash at closing or add it to the loan. The loan amount may include the fee on all VA loan types. The VA Lenders Handbook also notes the calculation runs on the principal after the fee is added when it is paid from loan proceeds.
Other points on payment:
- On a purchase, the fee is generally the only closing cost that can be added to the loan.
- The fee can be paid on the borrower’s behalf by the seller, the lender or another party.
- The lender collects the fee at closing and remits it to VA through VA’s electronic payment system. That is a lender obligation, not an added borrower cost.
Even at zero down, the funding fee and other closing costs still apply. A VA purchase is no-down-payment, not no-cost. Add up the fee, the appraisal costs and the other closing costs, and read them together on the Loan Estimate before deciding how much cash to bring.
Appraisal and Value
The VA appraisal sets the reasonable value, and the 100% financing structure depends on the price not exceeding it. The Handbook allows the veteran to pay for the VA appraiser and compliance inspections. A second appraisal requested as a reconsideration of value can be paid by the veteran, but not one requested by the lender or seller.
When the appraisal comes in below price, the borrower generally has to cover the gap in cash, renegotiate, or walk. That is the one place where a “zero down” purchase turns into a down payment purchase.
How the Loan Is Underwritten
Credit and income run through a different lens than most loans. VA sets no minimum credit score. The wholesale programs Lendmire places VA loans with start at a 580 decision score and serve loan amounts to $4,000,000 with full entitlement. Individual lenders may set higher floors.
Residual income is the controlling test. It measures what is left of the borrower’s income after the house payment, debts and basic living costs for the household. The 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above the table, so a financed fee that raises the payment still has to clear that test.
The fee does not change qualifying by itself. Its effect runs through the larger balance and the payment used in the ratios.
Where the General Rule Breaks
Cash-out refinance. The down payment tiers do not apply. The fee is 2.15% for first use and 3.3% for subsequent use. The VA cash-out reaches 100% of the appraised value including the financed fee. It can refinance any loan type into a VA loan, with seasoning and a net tangible benefit requirement. For a related comparison, see Lendmire’s piece Does a VA Loan Require Mortgage Insurance or Just a Funding Fee?.
IRRRL. The streamlined refinance of an existing VA loan carries a 0.5% fee unless the borrower is exempt. It requires no VA appraisal, a net tangible benefit, and seasoning of the later of 210 days from the first payment and the 6th payment. A surviving spouse who refinances this way is not exempt unless receiving the qualifying benefit.
Other loan types. A manufactured home loan not permanently affixed carries a 1% fee, and a loan assumption carries 0.5%, per the same VA exhibit.
Rule changes. Congress sets the fee tiers by law and has changed them before. Older schedules carried higher percentages. Always confirm the current table before relying on a figure from an older page.
Rental or second home. A VA purchase is for a primary residence. Occupancy decides the leverage.
Common Myths
- “VA loans have PMI.” They do not.
- “The funding fee is PMI.” It is a one-time upfront charge, not a recurring premium.
- “A down payment is required.” It is optional. It lowers the fee.
- “The fee must be paid in cash.” It can be financed.
- “I can pay now and get a refund if I’m exempt.” Lenders are told to establish exemption before closing.
- “The fee is based on the purchase price.” It is based on the loan amount.
Key Terms Defined
Funding fee: A one-time charge on a VA loan that supports the program and is waived for exempt borrowers.
Certificate of eligibility (COE): The VA document that confirms eligibility and shows funding fee status.
Entitlement: The amount of VA guarantee available to the borrower, either full or remaining.
Residual income: The money left each month after taxes, the house payment, debts and basic living costs.
IRRRL: The VA streamlined refinance of an existing VA loan.
Frequently Asked Questions
Do I have to put money down to avoid the funding fee?
No. A down payment lowers the fee but never removes it. Only an exemption removes it, such as receiving VA compensation for a service-connected disability.
Can I roll the funding fee into the loan?
Yes. The fee can be added to the loan amount on all VA loan types. That raises the balance and the long-run cost slightly, which is the tradeoff against paying cash at closing.
Does the fee change if I use my VA benefit a second time?
Yes, but only at the lowest down payment tier. Under 5% down, the fee goes from 2.15% to 3.3%. At 5% down or more, both first and subsequent use sit in the same 1.5% or 1.25% tiers. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
What if my disability rating is still pending at closing?
It matters what exists before closing. Exemption has to be established before closing, and a qualifying rating for a pre-discharge claim can count. Bring the rating documents to the loan officer at the start of the file.
Is the funding fee tax deductible?
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Next Step
If you are buying a home and want to see whether a VA loan fits your file, Lendmire can help you compare the options and what each one asks of the file.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. CFPB: What is mortgage insurance and how does it work
2. VA Circular 26-23-06, Exhibit B
5. VA Lenders Handbook, Chapter 8
This article is part of Lendmire’s VA loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Reduce or Avoid the VA Loan Funding Fee · How to Buy With No Down Payment on a VA Loan and Cover Closing Costs · How Much a Down Payment Saves a First-Time VA Loan Buyer on Active Duty
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.