The VA funding fee is required by law. The fee is currently 2.15% on no down payment loans for a first-time use, is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is 3.3%. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment.

For purchase and construction loans, members of the regular military fall into the category of first time user or subsequent user.

For first time users:

• no down payment requires a 2.15% fee
• up to 10% down payment requires a 1.5% fee
• 10% or more requires a 1.25% fee.

For subsequent users:

• no down payment requires a 3.3% fee
• up to 10% down payment requires a 1.50% fee
• 10% or more requires a 1.25% fee.

For the category of Reserves / National Guard, first time users with no down payment requires:

• 2.4% fee
• up to 10% down payment requires a 1.75% fee
• 10% or more requires a 1.5% fee.

For subsequent users, no down payment requires:

• 3.3% fee
• up to 10% down payment requires a 1.75% fee
• 10% or more requires a 1.5% fee.

The following persons are exempt from paying the funding fee:

•Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay.

•Surviving spouses of veterans who died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan).