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    Mortgage / VA

    VA loan and the funding fee

    The VA loan is the only mainstream product with no monthly mortgage insurance. Instead it charges a one-off funding fee — 2.15% of the loan on a first use with nothing down, 3.30% on a subsequent use — which is usually financed. That single difference is worth roughly $60,000 against an equivalent FHA loan over thirty years.

    Fee rate2.15%LTV102.2%LimitWithin
    Total monthly
    $3,099
    principal, interest, tax, insurance, HOA
    Funding fee
    $8,600
    2.15% of the base loan, financed
    Monthly insurance
    $0
    there is none on a VA loan
    Saving against FHA
    $67,419
    over the full term
    The payment, built up
    One fee at closing instead of a premium every month — that is the whole product.
    $3,099/mo
    The payment, built up
    ComponentMonthlyBasis
    Base loan$400,0000.0% down on $400,000
    Funding fee$8,6002.15% of the base loan
    Total loan$408,600fee financed
    Principal and interest$2,58330 years at 6.50%
    Monthly mortgage insurance$0none on a VA loan
    Property tax$4001.20% of value
    Homeowners insurance$1170.35% of value
    HOA$0monthly dues
    Total$3,099what the lender counts
    FHA equivalent$3,287with 0.55% MIP
    Lifetime FHA premium avoided$67,41946 months of MIP equals the fee
    2025 conforming limit$806,500full entitlement, no down payment

    The funding fee is 2.15% of the base loan, charged once and usually financed. There is no monthly mortgage insurance, so against an FHA loan at the same rate this saves about 67,419 over the term.

    Inspect the model
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    Funding fee against down payment
    The fee steps down at 5% and 10% — the only reason a VA borrower ever puts money down.
    Funding fee against down payment0.0002029.604059.206088.808118.401.015e+40%0%5%5%10%10%20%20%Fee
    Monthly payment against price
    Linear in price; the fee is the only non-proportional element.
    Monthly payment against price0.0001735.613471.215206.826942.428678.03250k250k400k400k600k600k806k806k1m1mTotal monthly
    Canonical equations
    The exact relationships implemented by this engine.

    price − down payment · What the VA guarantees.

    rate × base loan · 2.15% / 3.30% / 1.50% / 1.25%.

    P = A·r/(1−(1+r)^−n) · On the total loan including the fee.

    MIP × months · The premium a VA loan never charges.

    finance methodology

    A clear path from inputs to results.

    The VA loan is the only mainstream product with no monthly mortgage insurance. Instead it charges a one-off funding fee — 2.15% of the loan on a first use with nothing down, 3.30% on a subsequent use — which is usually financed.

    Step-by-step methodWorked exampleAssumptions explained

    How to use

    1. Enter the price, down payment and rate.
    2. Say whether this is a first or subsequent use, and whether you are fee-exempt.
    3. Add taxes, insurance and HOA.
    4. Compare the total monthly payment with an equivalent FHA loan.

    The formula

    F=rfee×(P−D)F = r_{fee} \times (P - D)

    Reference: VA Lender’s Handbook (VA Pamphlet 26-7), Chapter 8 for the funding fee; 2025 FHFA conforming limit of $806,500.

    Worked example

    $400,000 with nothing down, first use

    Inputs
    • $400,000 price, no down payment.
    • 6.5% for 30 years, 1.2% tax, 0.35% insurance.
    • First use, not exempt.
    Calculation path
    1. 1

      The base loan is $400,000 and the funding fee is 2.15% of it, or $8,600.

    2. 2

      Financing the fee gives a $408,600 loan.

    3. 3

      Principal and interest is $2,582.90; tax is $400 and insurance $116.67.

    4. 4

      The total payment is $3,099.57 with no monthly mortgage insurance.

    5. 5

      An FHA loan at the same rate would add $187 a month of MIP, which is $67,428 over thirty years.

    Result

    $8,600 fee · $3,099.57 a month · $67,428 saved against FHA.

    Interpreting the result

    The funding fee looks large and is still the cheaper product, because it is paid once while mortgage insurance is paid every month. The exception is a borrower who puts 10% down: the fee falls to 1.25%, but the down payment itself usually costs more than the fee saved.

    Assumptions & limitations

    • The funding fee is financed into the loan.
    • No monthly mortgage insurance is charged.
    • Taxes and insurance are estimated as a share of value.
    • The FHA comparison uses the same rate and a 0.55% annual premium.

    Frequently asked questions

    Who is exempt from the funding fee?

    Veterans receiving compensation for a service-connected disability, surviving spouses eligible for DIC, and some active-duty members with a Purple Heart. The exemption removes the fee entirely.

    Is there really no monthly insurance?

    Correct. There is no PMI or MIP equivalent; the funding fee is the entire insurance cost, which is why the VA product is cheaper than FHA over a long horizon.

    Can I refinance a VA loan?

    Yes — a VA-to-VA IRRRL is streamlined and usually requires no appraisal, and the funding fee is 0.50% for it.

    Why is a subsequent use more expensive?

    Because the fee is 3.30% rather than 2.15% with nothing down — the guarantee is being extended a second time on the same entitlement.

    What is the loan limit?

    With full entitlement there is no limit, but lenders generally require a down payment above the conforming limit of $806,500 for 2025.

    Methodology last reviewed 2026-10-22. Results are informational and not financial or engineering advice — see our disclaimer.