VA loans are the only major US loan program that routinely allows $0 down with no monthly mortgage insurance at all. That's a real advantage over FHA and conventional financing. What it doesn't mean is $0 cost for the insurance-like protection lenders require — it means that cost gets collected once, upfront, as the VA funding fee, instead of monthly for years.
How the Funding Fee Works
The VA funding fee is a one-time percentage of the loan amount, paid at closing or financed into the loan. Three things determine the rate: whether it's a purchase or refinance, your down payment size, and whether this is your first use of VA loan benefits or a subsequent use.
| Down Payment | First-Time Use | Subsequent Use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% – 9.99% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
Above 5% down, first-time and subsequent-use borrowers pay the same rate — the penalty for repeat use only bites at the lowest down payment tier. A VA Interest Rate Reduction Refinance Loan (IRRRL, the VA's streamline refinance) carries a flat 0.5% fee regardless of down payment or prior use.
Who's Exempt Entirely
Veterans receiving VA disability compensation, veterans who would receive it but instead receive retirement or active-duty pay, certain surviving spouses, and Purple Heart recipients on active duty typically pay no funding fee at all. Given how large this fee can get on a full-price loan, checking exemption status before closing is worth doing carefully — it's not something a lender will always flag proactively.
Worked Example
A $400,000 purchase, $0 down, first-time VA loan use:
| Item | Amount |
|---|---|
| Loan amount | $400,000 |
| Funding fee (2.15%, first use, <5% down) | $8,600 |
| Financed into loan | Typically yes |
| Monthly mortgage insurance | $0 |
Compare that to an FHA loan on the same price at 3.5% down: roughly $6,755 upfront MIP plus an ongoing monthly MIP charge for the life of the loan (see our FHA Loan Calculator for the full breakdown). The VA loan's single, larger upfront charge often works out cheaper over a multi-year holding period specifically because there's no recurring monthly insurance line at all.
Common Mistakes
Veterans sometimes assume a prior VA loan that's since been paid off or sold still counts as "first use" for fee purposes — it generally doesn't, unless entitlement was formally restored, and even after restoration, usage is still classified as subsequent.
Veterans also skip checking disability exemption status because they don't think of it as related to their loan — but a service-connected disability rating, even a partial one, can eliminate a $6,000-$10,000+ fee on a typical loan.
A third mistake: comparing VA loans to FHA/conventional purely on interest rate, without accounting for the fact that VA loans require no monthly mortgage insurance at all — a factor that can outweigh a slightly higher rate on another loan type once the full monthly payment is compared.
Where This Calculator Has Limits
It uses standard purchase-loan funding fee tiers — cash-out refinances use a different, flatter fee structure that doesn't scale down with home equity the way purchase loans scale with down payment. It also can't verify your specific exemption eligibility; that requires documentation through the VA, not a calculator input.
Frequently Asked Questions
Do I have to pay the funding fee in cash?
No — most VA borrowers finance it into the loan balance, which raises the loan amount and total interest paid, but avoids an out-of-pocket cost at closing.
Am I exempt if I have any disability rating at all?
Generally, a service-connected disability compensation rating of any level qualifies for the exemption — confirm your specific status with the VA before closing, since documentation timing matters.
Is the VA funding fee the same as PMI or FHA's MIP?
No — it's a one-time fee, not a recurring monthly charge, which is the core structural difference from both conventional PMI and FHA MIP.
Does a VA loan ever require a down payment?
Not typically for eligible borrowers within their entitlement limits — $0 down remains the standard VA loan structure, though a down payment does lower the funding fee.
Is the funding fee tax deductible?
As of the 2026 tax year, the VA funding fee is deductible for taxpayers who itemize, similar to other upfront mortgage insurance premiums — confirm specifics with a tax professional.
Related Tools
FHA Loan Calculator · Down Payment Calculator · Mortgage Calculator
Educational content, not financial advice. VA funding fee rates and exemption criteria are set by the Department of Veterans Affairs and can change — confirm your specific fee and eligibility with the VA or a VA-approved lender. Written by the MortgagePro Global team.