The VA funding fee is one of the most misunderstood costs in the VA loan process, and I get questions about it from almost every military buyer I work with in Hampton Roads. Here’s the short version: the VA funding fee 2026 is a one-time charge that helps keep the VA loan program running without requiring private mortgage insurance. It ranges from 0.5% to 3.3% of your loan amount depending on your situation, and there are several ways to reduce it or skip it entirely. Let me walk through the numbers.
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What the VA funding fee actually is
The VA home loan program doesn’t require a down payment or monthly PMI. That’s a massive benefit, but the program needs revenue to sustain itself. The funding fee fills that gap. It goes directly to the Department of Veterans Affairs and helps guarantee future loans for other veterans and service members.
Think of it this way: instead of paying PMI every month for years (which is what conventional borrowers do with less than 20% down), you pay one fee upfront and you’re done. On a $400,000 home in Virginia Beach with zero down and first-time use, that fee comes to $8,600. That sounds like a lot until you compare it to years of PMI payments on a conventional loan.
VA funding fee 2026 rate chart
The rates below have been in effect since April 2023 and remain current for 2026. Your rate depends on two things: whether this is your first VA loan or a subsequent use, and how much you’re putting down.
| Down Payment | First-Time Use | Subsequent Use |
|---|---|---|
| Less than 5% | 2.15% | 3.3% |
| 5% to 9.99% | 1.5% | 1.5% |
| 10% or more | 1.25% | 1.25% |
Source: VA.gov
A few things stand out here. First, putting just 5% down drops the fee significantly for both first-time and subsequent users. On a $400,000 purchase, that’s the difference between $8,600 (2.15%) and $5,700 (1.5%). Second, once you hit 10% down, the rate is the same whether it’s your first VA loan or your fifth.
What the VA funding fee looks like on Hampton Roads home prices
Let me put real numbers to this using local median prices. These are the funding fees you’d pay at zero down on a first-time VA purchase:
| City | Median Price | Funding Fee (2.15%) |
|---|---|---|
| Virginia Beach | $400,000 | $8,600 |
| Chesapeake | $420,000 | $9,030 |
| Suffolk | $400,000 | $8,600 |
| Norfolk | $330,000 | $7,095 |
| Newport News | $320,000 | $6,880 |
For subsequent-use buyers at 3.3%, those numbers jump. A $400,000 home in Virginia Beach would carry a $13,200 funding fee. That’s where the down payment strategy really matters.
Who is exempt from the VA funding fee
This is the section I always make sure my clients read carefully. Several groups pay zero funding fee:
- Veterans with a service-connected disability rating of 10% or higher. This is the most common exemption I see. If you have any VA disability rating at closing, you’re exempt.
- Purple Heart recipients. Active-duty service members and veterans who have received the Purple Heart are automatically exempt, regardless of disability rating.
- Surviving spouses receiving Dependency and Indemnity Compensation (DIC). If you’re a surviving spouse of a veteran who died in service or from a service-connected condition, the fee is waived.
- Service members with a pre-discharge disability claim. If you have a proposed or memorandum rating from a pre-discharge exam, that can support an exemption as long as it’s documented in your file.
Here’s what a lot of people miss: if you receive a retroactive disability rating after closing and the effective date is before your closing date, you may be eligible for a full refund of the funding fee. I’ve seen this happen with clients at Naval Station Norfolk who had pending claims when they bought. It’s worth checking.
Can you roll the funding fee into your loan?
Yes. Most buyers I work with in Hampton Roads choose to finance the funding fee into the loan rather than paying it out of pocket at closing. On a $400,000 purchase with a 2.15% fee, you’d be financing an extra $8,600 — making your total loan $408,600. Your monthly payment goes up by roughly $55 at a 6.11% rate, which most buyers find manageable.
The trade-off is straightforward: you keep more cash in your pocket at closing, but you pay interest on that fee over the life of the loan. For military families who are preserving cash reserves during a PCS, that’s usually the right call.
Is the VA funding fee tax deductible?
Good news here. The VA recently confirmed that veterans can now deduct VA funding fees on their taxes when purchasing a primary or second home. You’ll need to itemize your deductions on Schedule A, and the specifics depend on whether you paid the fee upfront or rolled it into the loan. Talk to your tax professional about the details, but this is a real benefit that wasn’t always available.
How to reduce your VA funding fee
If you’re not exempt, here are the levers you can pull:
- Put 5% down. This drops your fee from 2.15% to 1.5% on first-time use. On a $400,000 home, that’s saving $2,600 on the fee (though you’re putting $20,000 down to get there).
- Put 10% down. Drops the fee to 1.25% for everyone, first-time or subsequent use.
- File your disability claim before closing. If you have any pending claims with the VA, get them moving. A rating in place before closing means zero fee.
- Use a VA IRRRL for refinancing. The streamline refinance carries only a 0.5% funding fee, the lowest in the program.
Bottom line on the VA funding fee 2026
The funding fee is a real cost, but it’s the price of admission to one of the best mortgage programs available. No PMI, no down payment requirement, competitive rates at 6.11% as of March 2026. When you run the math against a conventional loan with PMI, the VA loan still comes out ahead in most scenarios.
If you’re buying in Hampton Roads and want to see exactly what the funding fee looks like on the homes you’re considering, let’s talk. I run these numbers for every VA buyer I work with so there are no surprises at closing. You can also search Hampton Roads homes to start looking at what’s in your price range.
I’m Sean Hudgins with Tier One Coastal Realty — a Navy veteran and VA loan specialist helping military families buy and sell across Hampton Roads.