VA Funding Fee: Finance vs Pay Cash

Most VA purchases include a funding fee unless an exemption applies. You can often finance it into the loan or pay it in cash at closing. That is a cash-to-close versus loan-size tradeoff, not a trick to erase the fee. Dollar figures on education pages are worked examples for illustration. They are not your payment, cash to close, or an offer of credit. Snapshot as of 2026-08 (VA funding fee schedule (confirm on va.gov before quoting)).

Snapshot percents (confirm before anyone quotes)

• First use, less than 5% down: 2.15%
• Subsequent use, less than 5% down: 3.30%
• First use, 5% to less than 10% down: 1.50%
• First use, 10% or more down: 1.25%

The funding fee is typically waived for veterans with a qualifying service-connected disability rating and for some surviving spouses. Entitlement and occupancy rules also apply. Zero down is available only with remaining entitlement and when the loan otherwise meets VA and lender guidelines. It is not automatic for every veteran.

Illustration: finance vs cash on a $450,000 purchase

Assume first-use, less than 5% down, at the 2.15% snapshot, zero down, and that the schedule still applies. Fee ≈ $9,675.

• Finance the fee. Loan amount ≈ $459,675. Monthly principal and interest is calculated on the higher balance. Cash to close is mostly closing costs and prepaids.
• Pay the fee in cash. Loan stays ≈ $450,000. Cash to close rises by about the fee plus the same costs and prepaids.

Compare those two shapes on a Loan Estimate, not this paragraph. Use the payment calculator only as an illustration.

What happens next

Confirm exemption status and the current VA schedule. Then read remaining entitlement if you already have a VA loan, and the VA program page for occupancy and COE.