Understanding the VA Funding Fee: What Home Buyers Need to Know

The amount of your VA funding fee will depend on multiple factors.

As a veteran or active-duty service member, you're likely already aware of the many benefits of a VA home loan—zero down payment, competitive interest rates, and no private mortgage insurance (PMI). But one cost that often catches borrowers by surprise is the VA Funding Fee.

At Local Mortgage in Memphis, we’re committed to helping our veteran community understand every aspect of their home financing journey. Here’s a breakdown of what the VA funding fee is, why it exists, and how you can plan for it.

What Is the VA Funding Fee?

The VA funding fee is a one-time charge paid to the Department of Veterans Affairs (VA) to help sustain the VA loan program. Instead of monthly mortgage insurance, this upfront fee helps offset the program’s cost to taxpayers, making it possible for the VA to continue offering no-down-payment loans to future generations of service members.

VA Funding Fee Rates (2025)

The VA funding fee is based on a few key factors:

• Your down payment amount

• Whether it’s your first time using a VA loan

• The type of VA loan (purchase, refinance, etc.)

  
  

Here are the standard rates for VA home purchase loans as of 2025:

Down Payment	First-Time Use	Subsequent Use
0%	2.15%	3.30%
5%	1.50%	1.50%
10%+	1.25%	1.25%

Example: On a $300,000 home with no down payment and first-time use, your funding fee would be $6,450.

Can the VA Funding Fee Be Financed?

Yes! You can roll the VA funding fee into your total loan amount, which means you don’t have to pay it out-of-pocket at closing. While this increases your overall loan balance, it keeps your upfront costs low—a huge benefit for many home buyers.

Who Is Exempt from the VA Funding Fee?

Some borrowers are exempt from paying the funding fee, including:

• Veterans receiving VA disability compensation

• Surviving spouses of veterans who died in service or from a service-connected disability

• Active-duty service members with a Purple Heart

At Local Mortgage, we’ll help you determine if you qualify for an exemption and ensure your Certificate of Eligibility (COE) reflects the correct status.

VA Loans in Memphis, TN: Local Expertise Matters

The Memphis housing market is unique—our neighborhoods range from historic Midtown to growing suburbs like Bartlett and Collierville. Working with a local mortgage expert means you get personalized advice tailored to your financial situation and the local market conditions.

At Local Mortgage, we specialize in helping veterans and military families navigate the VA loan process from start to finish. We’ll walk you through your eligibility, explain how the funding fee affects your loan, and help you decide whether to roll it into your mortgage or pay it upfront.

Final Thoughts

The VA funding fee may seem like just another line item on your closing disclosure, but understanding how it works can help you make smarter decisions. At Local Mortgage in Memphis, we’re here to make sure you’re informed, confident, and ready to close on your new home with peace of mind.

How I Can Help You

When it comes time to purchase a home or refinance an existing loan, I want to help you! Hopefully articles like this give you good information and a better understanding of the mortgage world but let me use my experience and expertise to help you with your particular situation.

I tell my clients and referral partners that a mortgage transaction starts with a simple conversation. Let’s talk about your financial situation, budget, and goals so that I can help you determine the best solution for you. During a 10-minute informal conversation, we can get you on the right path as it relates to a home purchase or mortgage refinance.