How the VA funding fee works
The VA funding fee is a one-time charge applied to every VA purchase loan. For first-time use with no down payment, the fee is 2.15% of the base loan amount. The fee drops to 1.5% with a 5% down payment and 1.25% with 10% or more down. Subsequent use carries a higher 3.3% fee unless you put at least 5% down.
The funding fee can be paid upfront at closing or rolled into the loan balance. When financed, it increases your total loan amount and therefore your monthly payment — but it avoids the need for a large lump sum at closing.
Funding Fee = Base Loan Amount × Fee Rate
Where the fee rate depends on down payment percentage, first vs. subsequent use, and loan type
Total Loan = (Home Price − Down Payment) + Funding Fee
The funding fee is added to the base loan when financed into the mortgage