A Virginia veteran buying a $500,000 home with a first-use VA loan and no down payment could have a VA funding fee of 2.15%, or $10,750. If that fee is financed at 6.25% on a 30-year fixed loan, the loan amount becomes $510,750 instead of $500,000. That adds about $66 per month to principal and interest, or roughly $3,972 in additional payments over the first five years. The VA funding fee is not a reason to avoid a VA loan, but it is a number worth planning for before you write an offer.
For a buyer looking at a larger-lot home in Manakin-Sabot, a renovated farmhouse near Oilville, or a conventional subdivision home in western Henrico, a VA loan can still be one of the strongest financing choices available. The key is understanding when the fee applies, whether you are exempt, and whether financing it makes sense for your goals.
Table of Contents
- What the VA funding fee pays for
- Current VA funding fee rates
- Who may be exempt
- Financing versus paying the fee at closing
- VA loans compared with conventional financing
- Goochland-area purchase planning
- Frequently asked questions
What Is the VA Funding Fee?
The VA funding fee is a one-time charge paid on most VA purchase, construction, and refinance loans. It helps support the VA home loan guaranty program, which allows eligible veterans, service members, and surviving spouses to access favorable terms without monthly mortgage insurance.
Unlike conventional private mortgage insurance, the funding fee is generally not a recurring monthly charge. Buyers may pay it in cash at closing, have it financed into the loan amount, or use a seller concession where permitted. The right choice depends on available cash, pricing, and how long you expect to keep the property.
The official VA funding fee guidance explains that the percentage changes based on the type of transaction, down payment, and whether the borrower has used VA entitlement before. A mortgage broker should verify the applicable fee early, not after a contract deadline is approaching.
Byline: Duane Buziak, NMLS #1110647, works with buyers across Goochland County and greater Richmond to compare VA, conventional, jumbo, USDA, FHA, and portfolio financing based on the property and the borrower’s full financial picture.
Current VA Funding Fee Rates
For most first-time VA purchase borrowers making less than 5% down, the funding fee is 2.15% of the base loan amount. A borrower using VA benefits again with less than 5% down generally pays 3.30%. A down payment of 5% to 9.99% typically reduces the fee to 1.50%, while a down payment of 10% or more generally reduces it to 1.25%.
For an Interest Rate Reduction Refinance Loan, commonly called a VA IRRRL, the fee is generally 0.50%. Cash-out refinancing follows the purchase-style first-use or subsequent-use structure. These figures can change, so the final Loan Estimate should always be reviewed carefully.
The fee applies to the base loan amount before it is financed. For example, a first-use buyer borrowing $600,000 with no down payment would have a 2.15% fee of $12,900. Financing it would produce a total loan amount of $612,900, assuming the appraisal and VA county loan calculation support the transaction.
| Funding scenario | Typical VA funding fee | Cash needed for fee | Effect on loan balance | Best fit |
|---|---|---|---|---|
| First VA use, under 5% down | 2.15% | Can be paid at closing | May be financed | Buyers preserving reserves |
| Subsequent VA use, under 5% down | 3.30% | Can be paid at closing | May be financed | Buyers reusing entitlement |
| VA purchase with 5%-9.99% down | 1.50% | Higher initial cash need | Smaller fee to finance | Buyers balancing payment and cash |
| VA IRRRL refinance | 0.50% | Depends on refinance structure | Usually may be financed | Existing VA borrowers refinancing |
| Conventional loan with less than 20% down | No VA fee | Down payment required | May include monthly mortgage insurance | Buyers with strong conventional profiles |
Who Is Exempt From the VA Funding Fee?
Many borrowers do not pay the VA funding fee. The most common exemption is for veterans receiving VA compensation for a service-connected disability. Borrowers who are entitled to receive compensation but receive retirement or active-duty pay instead may also qualify. Certain surviving spouses and active-duty service members who have received a proposed or memorandum disability rating may be eligible as well.
Your Certificate of Eligibility should show the exemption status. If it does not, do not assume the answer is final. A change in disability compensation status before closing can affect the fee, and documentation matters. This is one area where careful coordination between the borrower, VA records, and the broker can save real money.
Should You Finance the Fee or Pay It Up Front?
Financing the fee keeps more cash available for appraisal gaps, moving, repairs, and reserves. That can be particularly valuable with rural properties where a well inspection, septic evaluation, driveway repair, or outbuilding question may surface during due diligence.
Paying the fee at closing lowers the loan balance and monthly payment. On the $500,000 example, paying $10,750 in cash avoids financing approximately $66 per month at 6.25%. The trade-off is straightforward: preserve liquidity now or reduce long-term borrowing costs.
Closing costs on a Virginia purchase often total roughly 2% to 5% of the purchase price, depending on taxes, title charges, prepaid insurance, escrows, discount points, and property type. Seller concessions may be available within VA rules, and buyers should ask about our no-out-of-pocket closing options rather than assuming every cost must come from savings.
VA Loans Compared With Conventional Financing
A VA loan deserves comparison against conventional financing, not automatic selection. Conventional financing can be compelling for borrowers with strong credit, substantial down payment funds, or a property that does not fit VA guidelines. A 740-plus credit score often opens stronger conventional pricing, while many VA programs can accommodate scores around 620, subject to the full file and program overlays.
VA financing has no monthly mortgage insurance requirement, which can offset the one-time funding fee for many buyers. It also allows 100% financing for qualified borrowers. For a $500,000 purchase, avoiding a 5% down payment preserves $25,000 in cash, though the funding fee and closing costs still need to be addressed.
For 2026, the baseline conforming loan limit for a one-unit property is $832,750, subject to annual confirmation by the Federal Housing Finance Agency. Eligible VA borrowers with full entitlement are not bound by a VA county loan limit, but income, credit, appraisal, and residual-income requirements still matter. Larger Manakin-Sabot and Goochland acreage purchases may also bring appraisal complexity, especially where a home includes a detached shop, horse facilities, or significant land value.
What Goochland Buyers Should Watch
Goochland’s housing market is not one uniform price point. Recent Goochland County home value data from Zillow places the typical home value in the county around the mid-$400,000s, though Manakin-Sabot, Crozier, and larger-acreage areas can run significantly higher. A local valuation discussion should focus on the actual neighborhood, acreage, condition, and comparable sales, not a countywide median alone.
VA appraisals are designed to confirm value and minimum property requirements. A private well, septic system, shared road agreement, or older barn does not automatically prevent VA financing. It does mean the contract timeline and property review deserve attention. Buyers purchasing acreage should keep reserves after closing whenever possible. A practical target is two to six months of housing payments, although the right amount depends on household income, maintenance needs, and property complexity.
A fast pre-approval built around the actual property type is more useful than a generic online estimate. A no-touch credit pull can help start the conversation without a hard inquiry, then the broker can compare the VA structure with conventional or jumbo alternatives before you commit to an offer.
VA Funding Fee FAQs
1. Is the VA funding fee paid every month?
No. It is generally a one-time charge due at closing or financed into the loan balance.
2. Can the VA funding fee be rolled into the loan?
Yes. Most eligible borrowers can finance the fee, subject to the VA loan structure and appraisal-supported value.
3. Does every veteran pay the VA funding fee?
No. Veterans receiving qualifying service-connected disability compensation and certain other eligible borrowers may be exempt.
4. What is the first-time VA funding fee with zero down?
For most first-use purchase loans with less than 5% down, it is 2.15% of the base loan amount.
5. Does a VA refinance have a funding fee?
Usually. An IRRRL generally carries a 0.50% fee, while cash-out refinances can have higher fees based on prior VA use.
6. Can a seller help with VA closing costs?
Often, yes. VA rules allow certain seller-paid costs and concessions, subject to program limits and contract terms.
7. Is VA always better than conventional financing?
Not always. VA can be excellent because of zero-down financing and no monthly mortgage insurance, but conventional may fit better depending on credit, down payment, property, and pricing.
8. Can I use a VA loan for a Goochland home with acreage?
Possibly. The home must meet VA property requirements, and the appraisal must support the value. Well, septic, land use, and comparable sales should be reviewed early.
Before deciding how to handle a VA funding fee, run the numbers against your available cash, expected time in the home, and the property’s real inspection needs. A clear comparison can turn a complicated fee into a manageable part of a confident purchase plan.
Legal disclaimer: Mortgage programs, funding-fee percentages, credit standards, loan limits, property requirements, and closing costs are subject to change and borrower qualification. This article is educational only and is not a commitment to make a loan or an approval. Consult with a qualified mortgage broker and appropriate tax, legal, or financial professionals regarding your individual circumstances.
Duane Buziak | Mortgage Maestro | NMLS #1110647 | Coast2Coast Mortgage, LLC NMLS #376205 | Licensed in VA, FL, TN, GA & DC | [Contact] | NoTouch Credit Pull available — no hard inquiry, no credit hit.