Can You Roll the VA Funding Fee Into the Loan?

The VA funding fee is a one-time fee required by the Department of Veterans Affairs for most VA loans. It's a percentage of your total loan amount that helps keep the program running for future generations.
Unlike other closing costs, this fee is specific to VA mortgages. It is not an interest rate but a fee added to the loan amount. The rate can vary depending on the loan type and whether you've used your VA loan entitlement before.

Purpose of the Funding Fee

The primary purpose of this fee is to reduce the cost to taxpayers of the loan program. It helps the Department of Veterans Affairs offset loan losses, keeping the program self-sustaining. 
By requiring veterans to pay the funding fee, the VA can continue to offer favorable mortgage terms, such as no down payment and no private mortgage insurance, making it easier for veterans to buy a home. If you receive VA compensation or meet other exemption criteria, you may not need to pay the VA funding fee.

Try our funding fee Calculator.

Overview of VA Loan Closing Costs

When securing a VA loan, understanding all associated closing costs is important. Besides the funding fee, other common expenses include appraisal, credit report, title insurance, and recording fees.

These costs can often be negotiated or even rolled into your mortgage, allowing you to manage upfront expenses more effectively. However, the funding fee is unique, and whether it can be included in the total loan amount depends on your specific circumstances. Many veterans opt to roll this fee into the loan for convenience.

Rolling the VA Funding Fee Into Your Loan

How to Roll the VA Funding Fee

Rolling this fee into the loan is a common practice that many veterans choose to manage their upfront closing costs. When obtaining a mortgage, you have the option to include the fee in your total loan amount rather than paying it up front. 

This means the funding fee is added to the principal balance of your mortgage. To roll it into the loan, inform your lender that you wish to include this expense in the loan amount during the application process. The lender will then calculate the appropriate rates and add them to your total loan amount.

Benefits of Rolling the Fee into the Loan

Here are several benefits to rolling this fee into the loan. Specifically, doing so can:
Reduce the amount of cash you need to pay upfront at closing, making it easier to buy a home. Allow you to spread the cost over the life of the loan, leading to smaller, more manageable monthly mortgage payments.

However, it's important to consider that you will pay interest on this fee over the term of the mortgage, which will increase the total cost of the loan. If you have the means to pay the funding fee upfront, that may be a more financially sound decision.

Implications on Loan Amount

Rolling this fee into the loan directly impacts your total loan amount and monthly payments. By adding the funding fee to the principal, you increase the overall size of your mortgage.
This means you'll pay interest on a larger loan amount, resulting in higher monthly payments over the life of the loan. It's important to consider the rates when determining how they affect your loan amount and affordability.

While this approach can make it easier to manage upfront costs, be sure to assess the long-term financial implications of paying this fee in this manner. You also would not be eligible for a refund, even if you later receive VA compensation for a service-connected disability.

VA Funding Fee Exemptions

Eligibility for Exemptions

Certain veterans are eligible for exemptions, meaning they don't have to pay this fee. This is a significant benefit, as the funding fee can be substantial. 
Veterans who receive VA compensation for a service-connected disability are exempt from paying the VA funding fee. Also, veterans who would be entitled to receive compensation for a service-connected disability if they did not receive retirement pay are also exempt.

These exemptions help make homeownership more affordable for veterans. If you believe you qualify for an exemption, it's important to provide documentation of your VA compensation or pending claim to your lender.

Types of Exemptions Available

Several types of exemptions exist to assist eligible veterans. Some examples include:
Veterans who are receiving VA compensation for a service-connected disability fall under this category. Survivor spouses of veterans who have died in service or from a service-connected disability are also eligible to apply for a VA loan. Furthermore, veterans who are rated as eligible to receive compensation as of the effective date of their loan are exempt.

Understanding these different categories can help veterans determine if they qualify and avoid unnecessary costs. If you are unsure, consult with the Department of Veterans Affairs or a VA loan specialist.

How Exemptions Affect Closing Costs

Funding fee exemptions significantly reduce the closing costs for eligible veterans. When a veteran is exempt from paying this fee, it lowers the total loan amount needed to buy a home.
This can result in substantial savings, as the funding fee is a percentage of your total loan amount. In some cases, a refund may also be possible if the veteran becomes eligible for VA compensation for a service-connected disability after closing.

This adjustment can make a significant difference in the overall cost of the VA home loan and monthly mortgage payments. It's important to understand how these exemptions work to maximize the benefits of the VA home loan program.

2026 VA Funding Fee Rates

Current Funding Fee Rates for 2026

Understanding the rates is important for any veteran considering a VA loan in 2026. This one-time fee helps sustain the home loan program.
These rates can vary based on several factors, including the loan type and whether you've used a VA loan before. For a purchase loan, the rate may differ from a cash-out refinance or an interest rate reduction refinance loan.

Keeping abreast of current rates helps accurately estimate closing costs associated with the VA home loan program.

Changes in Funding Fee Rates Over Time

Over time, the Department of Veterans Affairs has adjusted rates to maintain the sustainability of the loan program. Historically, these changes reflect efforts to balance veterans' needs with the financial health of the home loan program. 

Comparing rates from previous years with those for the 2025 and 2026 VA home loan structures reveals trends. Such historical context can help veterans better understand that the current fee is a one-time cost and its implications on the total loan amount over the life of the mortgage.

Impact of Funding Fee Rates on Your Mortgage

The rate directly impacts your mortgage and overall loan amount. As this fee is a percentage of your total loan amount, even small changes in interest rates can affect your monthly payments. 
When considering whether to roll it into the loan, assess the impact on the interest rate and long-term costs. Some veterans may choose to pay the funding fee upfront, while others roll it into the loan to manage immediate expenses.

Refunds and Payment Options

Refund Process for VA Funding Fee

Understanding the refund process is important, as some veterans may be eligible for a refund under specific circumstances. Generally, if a veteran is later awarded VA compensation for a service-connected disability, they may be eligible for a refund.

The process involves submitting documentation to the Department of Veterans Affairs showing eligibility. Learn about the refund process to make sure you receive what you are entitled to if the condition is met.

Payment Options for the Funding Fee

Here are the options veterans have for paying this fee. Understanding these choices can help you make an informed decision. Veterans can:
Roll the fee into the loan, adding it to the total loan amount and paying it off over the life of the mortgage. Please arrange to pay the funding fee upfront at closing.
The decision depends on individual financial circumstances and preferences regarding the VA loan program.

Final Considerations on Closing Costs

As you finalize your VA loan, consider all closing costs and how they affect your financial situation in the context of the VA home loan program. Beyond the funding fee, remember to factor in appraisal fees, title insurance, and other expenses.

Weigh the benefits and drawbacks of rolling this fee into the loan versus paying it up front. Being well-informed about all costs helps you make the best decisions for your home loan so that you can buy a home with confidence and know whether you can refund the fee later.