The VA Funding Fee Explained (and When Its Waived)

If youre using a VA loan, the VA funding fee is a one-time VA charge that helps keep the program running for future Veterans. It can affect the monthly payment.

Good news: many borrowers dont pay it.

VA funding fee is a one-time upfront fee on many VA loans. Financing the funding fee is adding it to your loan balance instead of paying cash at closing. And an exemption is a rule that makes you eligible to pay $0 based on your status.

1) What the VA funding fee is (in plain English)

VA loans often allow $0 down. The tradeoff is the funding fee, calculated as a percentage of your loan amount based on loan type, down payment, and first vs. repeat use (VA.gov 2026).

2) VA funding fee rates: the numbers most buyers need

For the most common scenario around Fort Campbella purchase loanVA.gov shows these funding fee rates (effective April 7, 2023):

• First use, less than 5% down: 2.15%
• First use, 5%+ down: 1.5%
• First use, 10%+ down: 1.25%
• After first use, less than 5% down: 3.3%
• After first use, 5%+ down: 1.5%
• After first use, 10%+ down: 1.25%

Those percentages apply to the loan amount. That matters when youre budgeting cash-to-close in Clarksville TN.

3) A quick example: what 2.15% looks like in dollars

Example: a $350,000 loan amount at 2.15% is a $7,525 fee. If financed, it increases your balance to about $357,525.

4) When the VA funding fee is waived (the $0 situations)

VA.gov lists several situations where you dont have to pay the funding fee at all, including if youre receiving VA compensation for a service-connected disability (or eligible to receive it but drawing retirement/active-duty pay instead), certain surviving spouses receiving DIC, certain service members with a proposed/memorandum rating before closing, and Purple Heart recipients who provide evidence before closing (VA.gov 2026).

This is one of the biggest reasons I always ask Fort Campbell buyers to share their VA disability and award documentation early. If youre exempt, it can reduce your loan balance and payment.

5) How the funding fee interacts with rates and affordability

Even a fee thats only a couple percent matters when mortgage rates are higher. Freddie Macs Primary Mortgage Market Survey showed the average 30-year fixed rate at 6.48% as of June 4, 2026 (Freddie Mac PMMS 2026), and that same weekly rate is published on FREDs MORTGAGE30US series (FRED 2026). A higher balance can mean more interest over time.

If youre house-hunting in Montgomery County TN homes (or commuting toward Nashville), a clean comparison is: (1) payment with the fee financed, (2) payment with the fee paid in cash, and (3) payment if you qualify for a waiver.

6) Practical ways Clarksville-area buyers can reduce the fees impact

• Confirm exemption status early: If youre eligible, paying $0 is the best discount.
• Consider a modest down payment: Hitting 5% can reduce the fee from 2.15% to 1.5% for first-time use (VA.gov 2026).
• Budget cash-to-close strategically: Financing preserves cash; paying it can lower the payment.
• Compare the whole package: VA vs. FHA vs. conventional is more than just rate; its rate + MI + upfront fees + appraisal/underwriting rules. [INTERNAL LINK: Conventional vs. FHA vs. VA]
• Get a pre-approval that models scenarios: A strong mortgage pre-approval in Clarksville helps you write an offer that fits your payment comfort zone. [INTERNAL LINK: Step-by-Step Mortgage Pre-Approval Process]

Frequently Asked Questions

1) Can I roll the VA funding fee into my loan?

Usually, yes. Most buyers finance it by adding it to the loan amount, which raises your balance and payment. If cash is tight, financing may help; paying it can lower the payment. Well compare both.

2) Is the funding fee the same as mortgage insurance?

No. Mortgage insurance is usually a monthly charge on many conventional and FHA loans. The VA funding fee is typically a one-time upfront fee on many VA loans. Many Fort Campbell buyers still choose VA because it can avoid monthly MI.

3) How do I know if my funding fee is waived?

In many cases, youre exempt if youre receiving VA compensation for a service-connected disability, or you meet other VA-listed criteria like certain surviving spouse benefits or Purple Heart evidence before closing (VA.gov 2026). Ill help you confirm it early.

4) Whats the funding fee for a first-time VA buyer with $0 down?

VA.gov lists 2.15% for first-use purchase loans with less than 5% down (effective April 7, 2023). On a $300,000 loan amount, thats $6,450. Your exact fee depends on your final loan amount.

5) What if Ive used my VA loan benefit before?

If youve used VA before and are using it again, VA.gov shows it can be higherfor example, 3.3% for subsequent use with less than 5% down (effective April 7, 2023). A 5% or 10% down payment can reduce the fee.

6) Does a bigger down payment always reduce the fee?

For purchase and construction loans, yes5% or 10% down lowers the fee (VA.gov 2026). But some refinance types have a fixed fee that doesnt change with down payment. Loan type matters.

7) Do I pay the funding fee on a VA refinance?

Often, yes, but it depends on the refinance type. VA.gov lists IRRRL (streamline) refinances at 0.5%, while cash-out refinances can be higher (VA.gov 2026). If youre exempt, you may still pay $0.

8) Can the seller pay my VA funding fee?

Sellers can often contribute toward allowable closing costs, and concessions can reduce your cash-to-close. Whether the funding fee itself can be paid by the seller depends on whats allowed in your deal. Well structure it carefully.

9) How does the funding fee affect my monthly payment?

If you finance the fee, you borrow more, so your payment usually rises. That matters more when rates are higher; Freddie Macs PMMS showed 6.48% on June 4, 2026 (Freddie Mac PMMS 2026). Ill model the difference.

10) Should I choose VA or another loan type because of the funding fee?

It depends. Many Fort Campbell and Middle Tennessee buyers still prefer VA because theres often no monthly mortgage insurance and flexible guidelines. The best choice comes from comparing total cost, cash-to-close, and your timeline. [INTERNAL LINK: FHA Loans Explained]

Kate Matties-Deiboldt, NMLS #18487, VanDyk Mortgage Clarksville TN mortgage lender and Fort Campbell VA loan specialist.

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Sources: VA.gov funding fee rate charts (accessed 2026); Freddie Mac PMMS weekly mortgage rate averages (2026); FRED MORTGAGE30US 30-year fixed rate series (2026).