The Quick Read: For a first-time user, the fee is a percentage of the base loan, and the percentage depends on your down payment. The lender confirms your use status on the certificate of eligibility, finds your down-payment tier, and multiplies that percentage by the loan amount before the fee is added. If you finance the fee, it rides on top of the base loan. Veterans who receive disability compensation, and a few other groups, owe nothing.
That is the whole mechanism. The rest of this page walks through each step the way a loan officer does it, so you can check the number on your own file.
Key Takeaways
- The fee is one-time. It is not monthly mortgage insurance, and VA-backed purchase loans carry no mortgage insurance of any kind.
- The fee is a percentage of the loan amount, not the purchase price.
- For first use, the tiers are 2.15% with less than 5% down, 1.5% with 5% to under 10% down, and 1.25% with 10% or more down.
- You can finance the fee, which raises the loan balance but lowers the cash you need at closing.
- Exempt status is confirmed through VA before closing. Do not plan on a refund later. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
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.
What Does “Sizing the Fee” Actually Mean?
Sizing the fee means turning VA’s rate chart into one dollar amount on your loan. VA sets the percentages. The lender does the arithmetic and the paperwork.
VA describes the funding fee as a one-time payment that offsets taxpayer cost. The program has no required down payment and no monthly mortgage insurance, so the fee is how the system pays for itself. It goes to VA, not to the lender.
Two inputs drive the number, per VA: whether this is your first use or a later one, and how much you put down. Loan type matters too. A purchase uses down-payment tiers, while other loan types use their own rates.
That is the part VA controls. The part a broker controls is the sequence: verify, bracket, multiply, add, check. If you want the program basics first, Lendmire’s VA loan programs page covers what a purchase looks like from the start.
The Rate Chart for a First-Time Purchase
For a first-time purchase, three tiers apply, and the chart is the same for everyone who is not exempt. Per VA News, here is how it reads for purchase loans.
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.3% |
| 5% to under 10% | 1.5% | 1.5% |
| 10% or more | 1.25% | 1.25% |
Notice the pattern. A bigger down payment pulls the percentage down, and the subsequent-use penalty disappears once you reach 5% down. The other loan types use flat rates. A rate-and-term streamlined refinance (the VA streamline refinance) carries 0.5%. A cash-out refinance carries 2.15% for first use and 3.3% after. Lendmire’s explainer VA Cash-Out Funding Fee Rules for First or Subsequent Use goes deeper on that side. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Across the wholesale programs Lendmire places VA files with, these are the figures that show up on purchase files. Each is subject to lender guidelines and full file review.
The Lender’s Step-by-Step Sizing Sequence
A lender sizes the fee in a fixed order, and each step feeds the next. Skip one and the number on your estimate can drift from the number at closing.
| Step | What the lender checks | Where it comes from |
|---|---|---|
| 1. Use status | First use or subsequent use | Certificate of eligibility |
| 2. Exempt status | Exempt or non-exempt | Certificate of eligibility |
| 3. Loan type | Purchase tiers or flat rate | Your loan request |
| 4. Down payment | Percent of price, which tier | Contract and funds |
| 5. Base loan | Price minus down payment | Contract and appraisal |
| 6. Fee | Tier percent times base loan | VA rate chart |
| 7. Total loan | Base loan plus fee, if financed | Your payment choice |
Here is what happens at each step.
Step 1 and 2: eligibility. The certificate of eligibility, or COE, is VA’s document saying you qualify. It also carries your funding fee status. A VA circular refers to the “COE funding fee status” showing as non-exempt, which is how the lender knows to charge the fee at all.
Step 3: loan type. A purchase uses the down-payment tiers. A cash-out has no tiers. A streamlined refinance has its own rate.
Step 4: measure the down payment. The tiers are a percentage of the home’s price. VA’s own example treats a down payment of exactly 5% as landing in the 5% band. The statute defines the top tier as 10% or more of the purchase price, per 38 U.S.C. § 3729. A borrower at 9.9% down sits in the middle tier, so a few hundred more dollars at the margin can matter. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Step 5: find the base loan. That is the price minus your down payment. On a no-down purchase, the base loan is 100% of the price. VA no-down financing assumes the price is not above the appraised value.
Step 6: multiply. Fee equals tier percentage times base loan. The fee applies to the loan amount, not the price. VA’s worked example uses 5% down and applies 1.5% to the loan, not to the full price. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Step 7: add it, if you finance it. More on that below.
How Does a Lender Confirm “First Use”?
The lender confirms first use from the COE, not from your memory. The COE reflects VA’s record of whether you have used entitlement on a prior VA loan.
Most first-time buyers sail through this. A few cases need a second look:
- Records that look off. If you believe you never used the benefit and the COE says otherwise, the lender cannot just override it. The fix runs through VA, and the fee tier follows whatever the COE finally shows.
- A prior VA loan you have paid off or sold. A past loan that used entitlement generally means subsequent-use status unless VA’s records show otherwise. Read the COE rather than guessing.
- Active-duty applicants. The COE is the starting point, and the pre-discharge question below can change the answer.
If the COE is the sticking point on your file, Lendmire’s piece Can a Lender Get a VA Loan COE for a First-Time Active-Duty User? explains how that part works. Eligibility and service requirements are VA’s rules, and the COE decides.
Base Loan Versus Total Loan
The base loan is what you borrow before the fee. The total loan is the base loan plus the financed fee. The fee is sized on the base, not on the total.
That distinction trips people up. If the fee were sized on the total, it would be a little larger, because it would be charging a fee on the fee. It is not. Compute the percentage on the base, then add the result.
Financing also changes how the loan reads on paper. Your balance is higher than the price you negotiated, and the payment moves up with it, though no monthly mortgage insurance is added. Your lender runs the final figure through underwriting, where residual income is the controlling test. Residual income is what you have left each month after taxes, debts, housing costs and living expenses. The higher balance feeds into that test.
Worked Examples in Percentages
These examples use percentages of price, so you can scale them to any home. Each assumes a first-time, non-exempt borrower on a purchase.
| Scenario | Base loan | Fee tier | Fee as % of price | Total loan if financed |
|---|---|---|---|---|
| Zero down | 100% of price | 2.15% | 2.15% | 102.15% of price |
| 5% down | 95% of price | 1.5% | 1.425% | about 96.4% of price |
| 10% down | 90% of price | 1.25% | 1.125% | about 91.1% of price |
| Exempt, zero down | 100% of price | — | 0% | 100% of price |
Read across the rows. At zero down, the fee is 2.15% of a loan that equals the full price. At 5% down, the fee drops to 1.5%, and it applies to only 95% of the price. Both effects stack, which is why the fee as a share of the price falls faster than the tier percentage alone suggests. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
That makes the decision concrete. The 5% and 10% tiers lower the fee, and the fee then lands on a smaller loan. But a down payment is not required, and many first-time buyers skip it to keep cash. Both choices are legitimate. The trade is cash at closing versus a lower fee, and only your savings and your plans can settle it.
Financed or Paid at Closing?
You can pay the fee in cash at closing or include it in the loan, and the statute allows the fee to be paid from the loan proceeds.
Here is the plain comparison:
- Financed: Less cash at closing. A higher balance and a slightly higher payment. The financed total shows up in the final loan amount.
- Paid in cash: More cash at closing. A lower balance and payment. The fee is gone on day one.
Neither is wrong. Many buyers finance because cash to close is the tight spot. Others pay it because they would rather carry a smaller balance. If you finance, ask your loan officer to show you the final loan amount with the fee included, so the number on your estimate makes sense.
Seller concessions may also be used toward the fee, according to VA consumer guidance. The rules on what a seller can pay are set by the program and the lender, so confirm the details on va.gov and with your loan officer.
Who Pays Nothing? Exemptions and Timing
Veterans who receive compensation for a service-connected disability owe no funding fee. Under § 3729(c), the trigger is receiving compensation, or being entitled to it but for retirement or active service pay. The statute names no rating percentage, so a higher rating does not mean a bigger waiver.
Other exempt groups include surviving spouses of veterans who died from a service-connected disability or in service. Active-duty Purple Heart recipients and service members who have a disability rating before discharge are also exempt.
Timing matters more than most people expect.
Closing is the moment that counts. VA’s General Counsel treats the closing date as the operative event for assessing the fee. That opinion is the reason a pending claim does not help you if it is not resolved by then.
Pending pre-discharge claims. The lender should ask active-duty applicants about a claim in progress. If the COE shows non-exempt, the lender submits VA Form 26-8937. If no proposed or memorandum rating is obtained before closing, the service member is not exempt and gets no refund from VA, per VA Circular 26-23-19.
Do not close and plan on a refund. The same circular says lenders should not advise borrowers who believe they are exempt to close and request a refund later. Refunds are decided case by case and cannot be assured. A retroactive award dated before closing may support one, but treat that as a possibility, not a plan.
Check your exempt status on the COE early. A surprise at the closing table is avoidable.
Where the Fee Shows Up in Your Paperwork
The fee appears on your Loan Estimate and again on your Closing Disclosure.
1. Find the funding fee line and note the stated percentage.
2. Match the percentage to your tier: first or subsequent use, and your down payment.
3. Confirm the base loan the percentage was applied to. It should be the loan before the fee, not the price.
4. If you chose to finance, confirm the total loan includes the fee.
5. If you are exempt, confirm the fee is zero and the COE shows exempt.
If any line does not match, ask your loan officer to walk you through it before you sign.
What Can Change the Number Before Closing
Four things can move the fee before you close:
- Your down payment. Cross 5% or 10% and the tier changes.
- The price. A renegotiated price changes the base loan.
- Your exempt status. A resolved claim or a corrected COE can drop the fee to zero.
- The use count. A corrected COE record can move you between first and subsequent use.
An appraisal matters indirectly. VA sets the reasonable value, and your loan and down payment are measured against the price or the value. If the appraisal comes in under the price, the numbers move, and the lender re-sizes the fee.
Key Terms Defined
Funding fee: A one-time fee paid on a VA-backed loan. It helps cover the program’s cost because there is no required down payment or monthly mortgage insurance.
First use: The first time a veteran uses the VA home loan benefit. It carries the lowest tiers when the down payment is small.
Subsequent use: Any later use of the benefit. It carries a higher fee only when the down payment is under 5%.
Base loan: The loan amount before any financed fee is added. The fee percentage applies to this number.
Certificate of eligibility (COE): VA’s document confirming you qualify. It shows your use status and whether you are exempt from the fee.
Residual income: The money left each month after major obligations. It is the controlling test in VA underwriting.
IRRRL: VA’s streamlined refinance for an existing VA loan. It carries a 0.5% fee unless the borrower is exempt.
Common Misconceptions
“The fee is based on the purchase price.” It is based on the loan amount.
“Everyone pays 2.15%.” That is the first-use rate with less than 5% down. Down payment, use count, loan type and exemption all change it. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
“The fee is mortgage insurance.” It is a one-time fee. VA purchase loans carry no mortgage insurance.
“I need a down payment.” You do not, as long as the price is not above the appraised value. A down payment simply lowers the fee.
“I can close and get a refund later.” VA’s circular warns against that plan.
Frequently Asked Questions
What is the funding fee for a first-time VA buyer with no down payment?
It is 2.15% of the base loan, which at zero down equals the full price. Exempt borrowers pay nothing. If you finance the fee, the total loan runs above the price by that amount. Figures are subject to lender guidelines and full file review.
Does a larger down payment really lower the fee?
Yes, and the effect compounds. The percentage drops from 2.15% to 1.5% at 5% down and 1.25% at 10% down, and it then applies to a smaller loan. You are not required to put anything down, so it is a trade between cash at closing and the size of the fee. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Does financing the fee change my loan balance and payment?
Financing the fee raises your loan balance, and the payment moves up with it. The fee is not mortgage insurance, and no monthly insurance is added. Your loan officer can show you the final loan amount with and without the financed fee.
Is the funding fee charged every year?
No. It is a one-time fee, paid at closing in cash or included in the loan. VA purchase loans carry no ongoing mortgage insurance.
What if my disability claim is still pending when I close?
The closing date is the moment VA looks at. If you have no rating or proposed rating by then, you are not exempt for that loan. Refunds are decided case by case and cannot be promised, so raise a pending claim with your lender early.
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. VA – Funding fee and closing costs
2. VA News – Who pays and who is exempt
4. VA Office of General Counsel Precedent Opinion 2-2019
This article is part of Lendmire’s VA loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: VA Loan Mortgage Insurance and Funding Fee Rules With a Down Payment · How to Reduce or Avoid the VA Loan Funding Fee · VA Loan Funding Fee Rules for a Veteran Paying at Closing
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.