What is the funding fee?

A one-time fee paid to the VA at closing. It keeps the VA loan program self-sustaining so future veterans can continue to access the benefit.

Veterans receiving service-connected disability compensation, certain Purple Heart recipients, and surviving spouses receiving Dependency and Indemnity Compensation are exempt.

Do I have to pay it at closing?

No. In most cases the funding fee can be financed into the loan amount, so there is no out-of-pocket fee at closing.

Does the fee change with a down payment?

Yes. Putting 5% or 10% down reduces the funding fee percentage for first-time and subsequent uses.

Is the fee the same for second use?

No. Subsequent-use percentages are higher than first-use percentages when no down payment is made.

Can I get the fee refunded if I later become exempt?

Possibly. If service-connected disability is awarded with an effective date before the loan closing, a refund of the financed funding fee may be available.

VA Funding Fee Explained | Utah Veteran Guide

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By Tres Miller · Mortgage Lender · NMLS #217768

Reviewed June 22, 2026 · 25+ years lending in Utah

Why the funding fee exists

The VA loan program is largely self-funded by the funding fee. It allows the VA to extend benefits — 0% down, no PMI, lenient underwriting — to current and future generations of service members without relying entirely on taxpayer appropriations.

How the fee is calculated (purchase)

The fee is a percentage of the loan amount. The percentage depends on (1) first-time use vs. subsequent use, (2) down payment percentage, and (3) loan type. Specific percentages change occasionally via federal action; Tres confirms current rates the day you apply. Conceptually:

First-time use, 0% down — highest first-use fee tier.
First-time use, 5%+ down — reduced tier.
First-time use, 10%+ down — lowest tier.
Subsequent use, 0% down — higher tier than first use at the same down payment.

Who is exempt

Veterans receiving VA compensation for service-connected disability.
Veterans entitled to receive compensation but receiving retired or active-duty pay instead.
Purple Heart recipients on active duty (with eligibility documented).
Surviving spouses receiving Dependency and Indemnity Compensation.

Financed at closing

For most Utah veterans, the funding fee is rolled into the loan amount rather than paid out of pocket. That keeps closing-day cash to a minimum, especially when paired with seller concessions covering other closing costs.

Refunds when disability is later approved

If service-connected disability is later awarded with an effective date earlier than the loan closing, the financed funding fee may be refundable. This happens often enough in Utah veteran files to be worth checking proactively.