Yes, the VA funding fee can be rolled into your loan amount, while other purchase closing costs can’t.
The VA home loan includes a one-time charge called the funding fee. Many buyers prefer to add that charge to the mortgage instead of bringing extra cash to the table. Lenders and the VA allow that approach on purchase loans and most refinances. The trick is knowing when it helps, what it changes in your monthly payment, and which exceptions wipe the fee out entirely.
Quick Answer And What It Changes
You can add the fee to the base loan so you pay it over time with interest. Doing that raises the principal and nudges the monthly payment. Paying it in cash at closing keeps the balance lower. Both paths are allowed. A small group of borrowers owe no fee at all, which makes the choice easy for them.
| Situation | Typical Rate Range | How It’s Paid |
|---|---|---|
| First-time VA purchase with little or no down payment | About 2.15% of the loan amount | Add to loan or pay at closing |
| Repeat VA purchase with minimal down payment | About 3.3% | Add to loan or pay at closing |
| Purchase with ≥5% down | About 1.5% | Add to loan or pay at closing |
| Purchase with ≥10% down | About 1.25% | Add to loan or pay at closing |
| Cash-out refinance | About 2.15% first use; 3.3% after that | Add to loan or pay at closing |
| IRRRL (streamline refinance) | 0.5% | Add to loan or pay at closing |
| Native American Direct Loan | Purchase 1.25%; Refi 0.5% | Add to loan or pay at closing |
| Borrower with qualifying disability compensation or Purple Heart | 0% (exempt) | No fee due |
Financing The VA Loan Funding Charge: What It Means
Rolling the fee into the mortgage is allowed on all VA purchase loans. The rule is clear: you can include this fee in the loan amount, and you can’t include other purchase closing costs. That’s why you’ll often see a slightly higher “total loan amount” on the Loan Estimate than the base price plus any down payment. The difference is the fee being financed, plus any permitted energy-efficiency add-ons on certain refinances.
Only This Fee Is Rollable On Purchases
Many buyers ask if the appraisal, title, or similar costs can also be added. They can’t be added to a purchase loan’s principal. Those are paid in cash, by a seller credit, or with negotiated lender pricing. The funding fee is the sole purchase item that can be stacked on top of the base principal.
Seller Credits And Concessions
Sellers can cover some buyer expenses within a capped allowance. That bucket can include a credit for the funding fee, prepaid items, or a temporary rate buydown. The cap runs up to 4% of the home’s reasonable value for concessions, while standard closing cost credits aren’t capped by that 4% figure. If the seller grants a credit for the fee, you won’t need to finance it or bring cash for it.
Who Doesn’t Owe The Fee
Several groups don’t pay it at all. That list includes borrowers receiving compensation for a service-connected disability, those eligible for compensation but receiving retirement or active-duty pay instead, surviving spouses receiving DIC, certain service members with a qualifying pre-closing rating, and service members who provide Purple Heart documentation at or before closing. If a rating arrives after closing with an effective date before closing, a refund may be due.
Rates, Down Payment, And First Use
The percentage you pay depends on the loan type and down payment. Purchases with lower down payments carry higher percentages than purchases with 5% or 10% down. Repeat use with a small down payment carries a higher percentage than first use. Streamline refis use a flat half-percent. The charts on the VA site list the current numbers and examples of how the percentage applies to loan amount, not purchase price.
Cash Or Finance: Which Path Fits
Both paths get you to the same house. The choice comes down to cash on hand, timeline in the home, and tolerance for a slightly higher payment.
When Financing The Fee Makes Sense
- You want to preserve reserves for repairs, moving, or a cushion.
- You’re receiving a seller credit that covers other items, but not the whole fee.
- You plan to keep the loan short-to-medium term, so long-run interest on the fee won’t pile up for decades.
When Paying The Fee Upfront Wins
- You have the cash and prefer the lowest possible principal and monthly payment.
- You expect to hold the mortgage for a long time.
- You’re close to a debt-to-income limit and want to shave the payment.
Math Walkthrough On A Purchase
Say the base loan comes to $380,000 after your down payment. First-use purchase rate runs near 2.15%. That puts the fee at $8,170. Add it to the loan and the new principal becomes $388,170. Keep the rate and term the same and the payment rises by only the amount tied to that extra $8,170. Pay it in cash and the principal stays at $380,000, which trims the payment slightly and saves interest across the term.
| Factor | Finance The Fee | Pay At Closing |
|---|---|---|
| Cash Needed Day One | Lower | Higher |
| Monthly Payment | Slightly higher | Slightly lower |
| Total Interest Over Term | More, due to larger principal | Less |
| Break-Even If You Might Refinance/Sell | Often favorable short term | Favorable long term |
Refinance Paths And The Fee
Cash-Out Refinance
Cash-out loans carry the same first-use and subsequent-use percentages found on purchases, with no down-payment tiers. The fee can be added to the new principal. Lenders will still size the loan within VA’s value and program limits.
IRRRL (Streamline)
This refi uses a half-percent fee. Most borrowers add it to the new principal. That keeps cash to a minimum and ties with the program’s simplicity.
Seller Help And Credits—How They Interact With The Fee
Sellers can contribute to closing costs and concessions. Two rules matter. First, standard closing costs (title, appraisal, origination, and similar) can be paid by the seller with no specific percentage cap from the VA. Second, seller concessions—which include items like a credit for the funding fee, payoff of buyer debts, or a temporary rate buydown—are limited to 4% of the home’s reasonable value. A well-structured offer often pairs both buckets to reduce cash needed while staying inside the cap.
Exemptions And Refunds
Qualifying disability compensation status, DIC for eligible surviving spouses, and Purple Heart documentation at or before closing remove the fee. When a rating arrives after closing with an effective date before closing, a refund request goes through the VA regional loan center. Lenders follow set steps to verify status through the Certificate of Eligibility or the VA form used for verification.
Only One Purchase Cost Can Be Added To Principal
On purchases, other fees and discount points can’t be stacked onto the principal. That’s a bright-line rule in the lender handbook and on the agency’s consumer page. On certain refinance types, some costs may be included, but purchases don’t allow it.
How To Decide Between Cash And Financing
Ask Three Questions
- How long will you likely keep this mortgage?
- Do you need to conserve cash for repairs, reserves, or life expenses?
- Will the larger payment change your debt-to-income ratio in a way that squeezes approval?
Run A Simple Break-Even
Divide the fee by the monthly payment difference between the two paths. If the result is a long stretch and you might sell sooner, financing the fee can be a cash-friendly move. If you’ll stay for many years, paying it upfront keeps interest charges lower across the term.
Where To Check The Official Numbers
The VA maintains current rate charts, exemptions, and a clear statement that this fee can be included in the loan or paid in cash. You can read the consumer page and the lender handbook chapter that spells out which costs can be added to principal. Those two pages answer nearly every “can I roll this in?” question with plain rules and examples.
Action Steps Before You Lock
- Pull a fresh Certificate of Eligibility to confirm fee status.
- Ask your loan officer for two quotes: fee paid in cash and fee financed.
- If a seller credit is on the table, decide whether to apply it to standard costs, a temporary buydown, or the fee itself.
- Keep an eye on the total loan amount when financing the fee so you stay within any program or appraisal limits.
Helpful Official References
See the VA’s consumer page on the funding fee and closing costs. It shows financing is allowed and lists the current fee percentages and examples. The lender handbook chapter also states that the loan amount may include the funding fee on all VA loans and that no other purchase fees can be added to principal.
External references inside this guide: The VA consumer page linked here clearly states you may include the fee in the loan or pay at closing, and it explains seller concessions and the 4% cap. The lender handbook page linked here details which items can be added to principal on purchases and refinances.
Read: VA funding fee and closing costs |
Technical rule: Lenders Handbook Chapter 8