The VA Funding Fee in 2026: Rates, Exemptions, and What San Antonio Military Buyers Pay

What the funding fee is and why it exists

The funding fee is a percentage of the loan amount that the VA collects to offset the cost of the program to taxpayers. It is the tradeoff that lets qualified veterans buy with no down payment and no monthly mortgage insurance, which most conventional and FHA loans cannot offer. Because the fee can be financed into the loan, it becomes part of the balance you pay down over the life of the mortgage rather than a cash cost at closing.

The fee is not a closing cost charged by the lender, and it is not a penalty. It applies to most VA loans, and it is the same regardless of which lender you use, because the VA sets the rate. What differs from one lender to the next is whether the fee is paid in cash at closing or added to the loan, and how that choice affects your rate and monthly payment.

2026 rates by use and down payment

For a purchase or construction loan, the funding fee depends on whether you have used the VA benefit before and on your down payment. On a first use with less than 5 percent down, the fee is 2.15 percent of the loan amount. With 5 percent or more down it drops to 1.5 percent, and with 10 percent or more down it drops to 1.25 percent.

On a subsequent use, the rate is higher at the low down payment end: 3.3 percent with less than 5 percent down, then 1.5 percent with 5 percent or more, and 1.25 percent with 10 percent or more. So the down payment tiers matter most on a first use, while a second use carries a higher fee unless you put down at least 5 percent.

For a cash-out refinance, the fee is 2.15 percent on a first use and 3.3 percent on a subsequent use. For an Interest Rate Reduction Refinance Loan, the VA-to-VA streamline, the fee is 0.5 percent. These are the rates in effect for 2026, unchanged since April 2023.

Who is exempt from paying it

The exemption list is the reason many San Antonio veterans pay no funding fee at all. The fee is waived for veterans receiving VA disability compensation for a service-connected disability, at any rating, including 10 percent. It is also waived for veterans who would be entitled to that compensation but receive retirement pay or active service pay instead, and for active-duty service members with a pre-discharge disability rating, proposed or memorandum, that makes them eligible for compensation.

Surviving spouses of veterans who died in service or from a service-connected disability, and who receive or are eligible for Dependency and Indemnity Compensation, are also exempt. A borrower who qualifies for an exemption but paid the fee may be entitled to a refund, so it is worth confirming the exemption status before closing rather than after.

The exemption is tied to the borrower, not the property or the lender. It applies on a first use and on a subsequent use alike, which is a meaningful difference from the rate schedule, where a second use costs more.

How the fee changes the monthly payment

On a $300,000 loan with a first use and no down payment, a 2.15 percent funding fee is $6,450. Financed into the loan, that becomes part of the balance and adds to the monthly payment for the life of the mortgage. On a subsequent use with no down payment, the same loan carries a 3.3 percent fee of $9,900, a real difference in both the balance and the payment.

The choice between paying the fee in cash and financing it is a numbers question, not a rule. Paying it at closing lowers the loan balance and the monthly payment but ties up cash. Financing it keeps cash available for moving costs, repairs, or the buffer a PCS requires, at the cost of a higher balance. Tami walks buyers through both numbers before they commit, because the right answer depends on the whole financial picture, not the fee alone.

Because the fee is a percentage of the loan amount, the down payment tiers and the purchase price both drive the dollar amount. That is one reason the preapproval conversation includes the fee: it is part of the realistic monthly payment, not a surprise at the closing table.

The San Antonio picture for military buyers

Tami has represented VA buyers across Greater San Antonio for two decades, including service members at JBSA Lackland, Fort Sam Houston, Randolph Air Force Base, and Camp Bullis. In her experience, the funding fee is one of the most misunderstood parts of the VA loan, and the most common surprise is the opposite of what buyers expect: many are exempt and do not realize it until the question is asked.

For a household preparing for a PCS, the fee belongs in the same early conversation as the credit score, the down payment, and the monthly payment. Knowing whether the fee applies, and at what rate, shapes the realistic budget before the house hunt starts. Tami is not a lender and does not quote rates, but she helps buyers get the financing picture clear and connects them with lenders who handle VA files well, including the funding fee and exemption paperwork.

Questions to ask before you sign

Confirm your exemption status with the lender before closing, and have your VA disability award letter or proposed rating letter ready if it applies. Then ask these questions:

Is the funding fee being paid in cash at closing or financed into the loan, and what does each option do to my monthly payment?

Am I exempt, and has the lender filed the exemption with the correct documentation?

What is my exact rate tier, first or subsequent use, and how much down payment would move me to a lower tier?

If I paid the fee and later qualify for an exemption, how do I request a refund?

How does the fee interact with the appraisal and the maximum loan amount for the property I am considering?

Frequently Asked Questions