Understand the funding fee's purpose
The VA funding fee helps support the guaranty program and is generally determined according to the applicable transaction and borrower circumstances. It is not a monthly private mortgage insurance premium. Financing the fee, when permitted, increases loan principal even if it lowers cash required upfront.
- Ask for the applicable fee calculation
- Compare financed versus out-of-pocket cost where allowed
- Keep the fee separate from other closing charges
Review exemptions carefully
VA guidance identifies circumstances in which the funding fee does not apply, including some service-connected disability benefit situations. A determination should be supported by the relevant VA entitlement or benefits information—not a seller's assertion or an assumption based on military service alone.
- Ask the lender to confirm the exemption status
- Review COE and benefit evidence where appropriate
- Address unclear status before closing
Remember that other expenses remain
An exempt VA borrower still needs to account for property taxes, title charges, homeowners insurance, inspections and other permitted closing expenses. A zero-down loan is not automatically a zero-cash transaction.
- Review property-specific insurance and taxes
- Include prepaid expenses in the cash plan
- Compare permitted seller credits and lender credits
Official information
Terms, loan rules, funding and eligibility can change. These references are for education; always confirm the current written terms with the appropriate agency and lender.
VA — Funding fee and closing costs ↗