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The VA funding fee is a one-time charge added to every VA purchase loan. It's not a down payment. It's a fee paid to the Department of Veterans Affairs to keep the loan guarantee program running, and it's what makes no monthly mortgage insurance premium possible. On a $350,000 home, first-time use, zero down, the fee is 2.15%. That works out to $7,525. You can pay it at closing or roll it into your loan balance. Most borrowers roll it in. Either way, knowing what you owe and whether you owe it at all is worth your time before you sign anything.
The VA guarantees a portion of each loan it backs. When a borrower defaults, the VA covers part of the lender's loss. That guarantee is what lets lenders approve VA loans with no down payment and no private mortgage insurance. The funding fee is how the VA keeps that guarantee fund solvent. It gets charged at closing and sent directly to the VA. Your lender doesn't keep any of it.
No monthly PMI exists on a VA loan because this fee takes its place. A conventional loan without 20% down typically requires private mortgage insurance, which runs $80 to $150 a month on a $350,000 loan and continues until you reach 20% equity. VA borrowers skip that permanently. The trade is a one-time upfront cost instead of years of monthly payments. For most Texas veterans who stay in a home five or more years, the one-time fee is the better deal. But it is real money, and you shouldn't minimize that going in.
The VA has operated this guarantee structure since 1944. The funding fee has been part of it since Congress put the program on a more self-sustaining footing in the late 1980s. The fee rates have adjusted over time, and Congress can change them. The rates in this article reflect the current schedule. Confirm your exact fee with your lender when you get a loan estimate.
The rate depends on three things: whether this is your first VA-guaranteed loan or a subsequent one, how much you put down, and the loan type.
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% to 9% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
First use at zero down is 2.15%. That's the most common scenario for Texas veterans buying their first home with VA financing. Subsequent use at zero down jumps to 3.30%. On a $350,000 loan, that extra 1.15 percentage points costs $4,025 more than first use. If you've used a VA loan before, that number matters when you're deciding how much to put down on your next purchase.
Streamline refinances follow a different schedule. The VA's IRRRL carries a flat 0.50% fee regardless of how many times you've used VA financing before. That's just $1,750 on a $350,000 balance. Cash-out refinances use the same first-use/subsequent-use schedule as purchases. See the full details in our guide to the VA IRRRL streamline refinance in Texas.
Certain veterans and surviving spouses owe no funding fee at all. The exemptions are written into federal law. You qualify for a full waiver if you are:
On a $400,000 first-use purchase with no down payment, the 2.15% fee would be $8,600. If you're exempt, that stays in your account. It's not a paperwork technicality. It's $8,600.
The exemption must appear on your Certificate of Eligibility before the loan closes. The VA marks it there once your disability status is on file with them. If you've been rated but haven't checked your COE recently, do that now. Don't assume the exemption is showing. Confirm it. Our guide to the VA Certificate of Eligibility in Texas explains how to pull yours and what to look for.
One thing the exemption doesn't cover: the rest of your closing costs. You still pay appraisal fees, title insurance, prepaid taxes and insurance, and any discount points. The funding fee waiver is specific to that one charge.
You can add the funding fee to your loan balance rather than paying it out of pocket at closing. On a $350,000 purchase with a 2.15% fee, your loan becomes $357,525. You don't need to show up with $7,525 in hand on closing day. That's the main reason most VA borrowers choose to finance it.
The cost of doing so is real, though. At a 30-year term, adding $7,525 to your balance increases your monthly payment by roughly $35 to $45, depending on your rate. You'll also pay interest on that $7,525 for the life of the loan. If you carry a 30-year mortgage to term, the total interest cost on that $7,525 adds up. It's worth knowing that before you decide.
Paying cash at closing makes more sense in a few situations. If you're already bringing funds and the extra $7,525 doesn't strain your reserves, paying it upfront saves you the long-term interest. It also makes sense if you're planning to sell or refinance within three to five years, because you won't have time to benefit from the lower monthly payment being spread over the full term. If you're staying long-term, rolling it in and keeping that $7,525 in savings or invested elsewhere is a reasonable call.
Your loan estimate will show the exact payment difference for your specific rate and term. Ask your lender to run it both ways so you can compare.
Sometimes, but usually not as much as it seems. Here's the math on a $350,000 purchase, first use.
Zero down puts your fee at 2.15%, which is $7,525. Putting 5% down ($17,500) drops the fee to 1.50%, or $5,250. You save $2,275 on the fee. But you spent $17,500 to save $2,275. That's not a compelling trade on its own.
Going from 5% down to 10% down saves another $875 on the fee (from 1.50% to 1.25%) for another $17,500 out of pocket. Even less compelling.
Zero down is usually the right call for first-time VA borrowers. The benefit exists specifically so eligible veterans don't have to deplete their savings to buy a home. The funding fee is real money, yes, but the alternative on a conventional loan at the same down payment is paying PMI every month and coming in with less flexibility for repairs, emergencies, or other expenses after closing.
The exception comes on a subsequent VA purchase. If you've used VA before and you're buying again at zero down, the fee jumps to 3.30%. At that point, putting 5% down drops it back to 1.50% and saves $6,300 on a $350,000 loan. That's a different calculation, and it may make sense to put 5% down if you have the cash from your prior home's equity. See today's Texas VA loan rates for current rate context when you're running that comparison.
The Texas Veterans Land Board loan, commonly called the Texas Vet loan, uses the federal VA guarantee. It's not a separate government insurance structure. So the VA funding fee applies the same way it would on a standard VA purchase loan from any lender.
What the VLB adds is a below-market rate on top of the VA structure. You're still working within the VA program. The funding fee schedule is identical. The exemptions are identical. A Texas veteran rated at 10% service-connected disability pays no funding fee on a VLB loan, just as they wouldn't on a standard VA loan. Full program details are in our Texas Vet loan program guide.
The VLB currently lends up to $832,750. Above that, you'd look at a jumbo VA option. For specifics on how the loan limit works and what happens at higher purchase prices, see our guide to Texas Veterans Land Board loan limits.
Not every lender that handles standard VA loans participates in the VLB program. If the below-market VLB rate is a priority for you, confirm your lender is an approved VLB originator before you get deep into the process.
The comparison is fairly direct. Conventional loans with less than 20% down require private mortgage insurance. On a $350,000 loan, PMI typically runs $80 to $150 per month depending on your credit score and down payment. It continues until you reach 20% equity, either through paydown or appreciation.
The VA funding fee at 2.15% first use is $7,525 one time. After that, no monthly mortgage insurance. Ever.
At $100 per month in conventional PMI, you accumulate $7,525 in cumulative PMI payments at 75 months, or about six years. If you stay in the home longer than six years, the VA structure was cheaper in total mortgage insurance cost. Most Texas homeowners hold their homes considerably longer than six years.
There's more to the comparison than just PMI. VA loans typically carry rates that run below conventional equivalents because lenders face less risk with the VA guarantee behind them. You're not just avoiding monthly PMI, you're often borrowing at a lower rate from day one. See what rates are doing now on the Texas VA loan rate tracker. That rate difference compounds over 30 years and can outweigh the funding fee many times over.
One honest counterpoint: a conventional loan at 20% down has neither PMI nor a funding fee. If you have $70,000 in savings on a $350,000 purchase, a conventional loan might be worth comparing carefully. But that's a different scenario than most Texas veterans are in. If the choice is between VA at zero down and conventional at less than 20% down, VA usually wins.
Your VA entitlement can be restored after you pay off a VA loan and sell the property. Once restored, you can use VA benefits again. The funding fee structure changes, though.
Subsequent use at zero down is 3.30%. On a $350,000 purchase, that's $11,550, compared to $7,525 at first use. The difference is $4,025.
Putting 5% down on a subsequent purchase drops the fee to 1.50%, the same rate as first-use at 5% down. That saves $6,300 on $350,000 compared to subsequent use at zero down. If you've built equity in your first home and can roll some of it into a down payment on the next one, that math starts to make sense.
On the other hand, if your entitlement restores fully and your rate comparison looks strong, zero down still has real appeal. The higher subsequent-use fee is a consideration, not a reason to avoid VA entirely. Your lender can run the numbers on both structures so you can compare them side by side.
For a full explanation of how entitlement works, what a funding fee charge looks like when entitlement is only partially restored, and how concurrent VA loans work in Texas, see our guide on how a VA loan works.
It happens more than people realize. A veteran gets rated at 10% or higher after their loan closes and realizes they would have been exempt if the rating had come through in time. Or a veteran was already rated, but the COE didn't reflect it yet and the lender collected the fee at closing.
You can get that money back. VA Form 26-8923 is the funding fee refund request. The key condition: your disability rating's effective date must predate your loan closing date. The rating doesn't need to have been in your hands at closing, but it does need to have been effective before that date. If your rating backdates to a period before you closed, you're entitled to a refund.
The refund comes from the VA directly to you. Your lender can't issue it. Submit the form and supporting documentation to the VA and they'll process it. It's not instant, but it's not complicated either.
The better approach is to catch it before closing. If you've filed a disability claim and you're waiting on a decision, tell your lender. Some lenders will hold the closing briefly if a rating decision is imminent. Others won't. Either way, a confirmed rating before you sign keeps you out of the refund queue entirely. If you're in the process of being evaluated, don't assume the fee will apply. Ask your lender what happens if your rating comes through before the closing date.
The VA funding fee is one part of the cost picture for a Texas VA loan. Confirming your exemption status, checking your entitlement, and understanding the rate environment are all things you can do before you ever sit down with a lender. Start with the free 60-second eligibility check, which doesn't pull your credit and connects you with a Texas-licensed professional who can walk through your specific situation. For eligibility basics, read who qualifies for a Texas Vet loan. This site is not a lender, is not affiliated with the VA, the Texas Veterans Land Board, or any government agency, and nothing here constitutes a commitment to lend.
See what you qualify for in 60 seconds, free and no credit check. Use the eligibility check at the top of this page.
No. Any veteran with a service-connected disability rating of 10% or higher is fully exempt from the funding fee. The exemption is permanent and must be confirmed on your Certificate of Eligibility before closing.
Yes. VA allows you to finance the funding fee into the loan balance. On a $350,000 purchase at 2.15%, that adds $7,525 to your loan for a balance of $357,525. You'll pay interest on that amount over the life of the loan, which adds roughly $35 to $45 per month.
Congress has periodically allowed it as a deductible mortgage point, but this changes year to year. Ask your tax preparer whether the funding fee qualifies as a deductible mortgage point in the current tax year.
Submit VA Form 26-8923 to request a refund. You'll need to show your disability rating effective date preceded your closing date. The refund comes directly from the VA to you, not through your lender.
No. The VLB loan uses a VA guarantee, so the VA funding fee applies. Disabled veterans who are exempt from the VA funding fee keep that exemption on a VLB loan.
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