How to Roll the VA Funding Fee Into Your Loan at Closing

The Quick Read: On a VA purchase, the funding fee can be added to the loan amount instead of paid in cash at closing. It is the only closing cost that can be financed on a purchase, so everything else still comes from cash, seller credits, or lender credits. Rolling it in lowers cash due at the table, but the balance and the interest over time go up.

Most buyers who use VA financing expect a $0 down payment. They are often surprised that $0 down does not mean $0 to close. The funding fee is the largest VA-specific charge, and it is the one item the program lets you finance. This article walks through how that works, what it does to the loan, where the rule breaks, and how to decide.

What Does “Rolling In” the Funding Fee Mean?

Rolling in means the lender adds the fee to your base loan, and you repay it over the loan term. You do not write a check for it at closing. The fee is a one-time charge paid to VA, not to the lender, and it is not mortgage insurance. VA.gov explains that the fee exists because the program does not require a down payment or monthly mortgage insurance.

For all types of VA loans the loan amount may include the funding fee. Here is the part buyers miss. On a regular purchase, the VA Lenders Handbook (Pamphlet 26-7, Chapter 8) says no other fees or charges may be included in the loan amount. Only refinance loans may include other allowable costs.

Across the wholesale programs Lendmire places VA files with, the program itself offers 100% financing with no mortgage insurance. With full entitlement there is no VA loan limit. The fee is the one cost that sits on top of that structure.

Key Terms Defined

Funding fee: A one-time charge paid to VA on a VA-backed loan, set as a percentage of the loan amount.

Base loan: The loan amount before the funding fee is added.

Certificate of Eligibility (COE): The VA document that confirms your eligibility and shows whether you owe the fee or are exempt.

Subsequent use: Using your VA benefit again after a first VA loan, which carries a higher fee tier when the down payment is small.

Entitlement: The portion of the VA guaranty available to you on a loan.

How Does the Fee Get Added at Closing?

The lender figures the fee, adds it to the base loan, shows it on your disclosures, collects it at closing, and sends it to VA. You do not pay VA directly. In practice, the deal works in this order.

1. Your COE sets your fee status. The COE comes from VA and tells the lender whether you are exempt. Get it into the file early, because the exemption call has to be settled before closing.

2. The lender sets the fee tier. The tier depends on three things: first or subsequent use, down payment, and loan type. For a purchase, the program figures are 2.15% for first use with less than five percent down, 1.5% with five to under ten percent down, and 1.25% with ten percent or more down. Subsequent use is 3.3% with less than five percent down, with the same 1.5% and 1.25% tiers above that.

3. The fee is applied to the loan amount, not the price. VA’s own worked example shows a home with a small down payment where the fee is figured on the smaller loan balance, not the sale price. A bigger down payment shrinks both the loan and the fee.

4. The fee is added to the base loan. That becomes your new total loan amount. You will see it on the Loan Estimate and again on the Closing Disclosure, so review both for the financed fee line.

5. The lender collects and remits. The lender verifies exempt status, calculates the fee, collects it at closing, and sends it to VA through VA’s payment system. It then submits proof of payment, or proof of exemption, with the closed-loan package.

That last step matters. The fee is not lender revenue, and the lender cannot discount it. VA sets it.

What Can’t You Roll In on a Purchase?

Only the funding fee can be financed on a VA purchase. Other closing costs and prepaid items cannot be added to the loan. 38 CFR 36.4313 bars any borrower charge not expressly permitted and keeps closing costs and prepaids, such as hazard insurance and current-year taxes, out of a purchase loan.

Seller concessions can help with the fee and other costs. VA guidance sets a limit on concessions, and the amount is a lender and file question, so ask your loan officer how it applies to your contract. Treat this as a conversation to have early, not a number to assume.

Roll It In or Pay Cash?

Rolling it in protects your cash. Paying cash keeps the balance lower. Neither choice is wrong. The right one depends on your cash on hand, how long you plan to stay, and how tight your budget is.

The cost of financing is simple to describe. The fee becomes part of the balance, so you pay interest on it for as long as you hold the loan. A short stay in the home means you carry that extra interest for less time. A long stay means more. A buyer who sells or refinances early repays the financed fee along with the rest of the balance.

You can also pay part in cash and roll the rest, if the lender allows it. It is a middle path that some borrowers never hear about.

Does Rolling It In Hurt Qualifying?

It adds to the loan amount that feeds your payment, so it can nudge the numbers. It does not block approval on its own. Across the wholesale programs Lendmire works with, residual income is the controlling test on a VA file. The 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above the table.

VA loan programs also start at a 580 decision score on the wholesale side. VA sets no minimum score itself, and individual lenders set their own floors. Everything depends on lender guidelines and a full file review. Nothing here is a commitment to lend.

On the appraisal side, the VA appraisal sets reasonable value. On a purchase, the price should not be above the appraised value for 100% financing to work. The fee is financed on top of the base loan. Ask your loan officer how your file handles it.

Where the General Rule Breaks

The purchase rule is clean. These cases are where it shifts.

Exempt borrowers. Borrowers who receive VA compensation for a service-connected disability are exempt from the VA funding fee. VA recognizes other exempt groups too, and the COE shows your status. If exemption is not verified before closing, the fee is handled as if you were not exempt, so settle it first. Do not plan to close now and chase a refund later.

Retroactive disability awards. If VA later awards compensation retroactive to before closing, a refund can be due. If the fee was financed, the refund may be applied to the loan rather than paid out as cash. Confirm how this works with your lender.

Refinances. Refinance rules are looser than purchase rules. The IRRRL fee is 0.5%. A VA cash-out refinance is 2.15% for first use and 3.3% after. A VA cash-out reaches 100% of the appraised value including the financed fee, and any part of the fee that would push the loan past that limit has to be paid in cash. Refinances may also include other allowable costs, which a purchase cannot.

Assumptions. When someone assumes an existing VA loan, the fee is one-half percent of the balance, per 38 CFR Part 36. Whether it can be financed into the assumed balance is a question for the lender who services the loan.

Manufactured homes not permanently affixed. The fee is 1.00% in that case, per the Handbook tables.

Reserve and Guard borrowers. Older Handbook tables showed higher tiers for Reserve and National Guard members. VA’s current chart groups Veterans, active-duty members, and Guard and Reserve together, so confirm which tier applies to you against the current chart.

How to Lower or Avoid the Fee

Three levers move the number.

• Down payment. Five percent down drops a first-use fee to 1.5%, and ten percent drops it to 1.25%. The fee is also figured on a smaller loan.
• Exemption. Service-connected disability compensation and the other exempt groups owe nothing.
• Seller help. A seller concession can pay the fee, within the limits that apply to your contract.

Here is the trade-off worth thinking through (and it is a real one). Putting money down shrinks the fee, but it also drains the cash you might need after move-in. Rolling the fee in does the reverse. A buyer with limited savings often does better keeping cash in the bank.

What Happens When You Refinance or Sell Later?

A financed fee is part of your balance. When you sell, it is paid off with the rest of the loan from the proceeds. When you refinance, the new loan has to cover it. An IRRRL needs a net tangible benefit and seasoning of the later of 210 days from the first payment and the 6th payment. A cash-out refinance carries the same seasoning and benefit tests.

Paying the loan down early lowers the balance that includes the financed fee, which cuts the interest you pay on it.

Mistakes to Avoid

• Assuming you can roll in appraisal, title, or prepaid costs on a purchase. You cannot.
• Treating the fee as mortgage insurance. It is one-time, and VA loans carry no monthly mortgage insurance.
• Guessing your fee tier. Use your use history and down payment.
• Skipping the COE review. An unverified exemption can cost you at closing.
• Mixing up credits with financing. A seller credit pays a cost. It does not add to your loan.

Questions to bring to your lender: Is my fee exempt? Which tier applies? Can I roll in part? How does it show on the Loan Estimate and Closing Disclosure? What does a seller concession cover on my contract?

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 related reading, see Lendmire’s piece How Much a VA Cash-Out Nets After the Funding Fee and Closing Costs.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. VA.gov Funding fee and closing costs

2. VA Lenders Handbook (Pamphlet 26-7), Chapter 8

3. eCFR 38 CFR 36.4313

4. eCFR 38 CFR Part 36