VA Loan Funding Fee in 2026: Who Pays It and Who's Exempt

If you are buying near Fort Hood with a VA loan and putting little or nothing down, plan on a one-time fee of 2.15% of your loan amount. On a typical first purchase here that is several thousand dollars, and most buyers roll it into the loan instead of paying it in cash at closing. Here is the part that catches people off guard, though: the fee is not automatic for everyone. A specific group of buyers is exempt, and whether you are in it comes down to one question about your VA status — asked before closing, not after. This is how the 2026 VA funding fee works, what you would owe, and who does not pay it at all.

What the VA Funding Fee Actually Is

The funding fee is a one-time payment the VA charges on VA-backed and VA direct home loans. It exists so the VA loan program — which requires no down payment and no monthly mortgage insurance — stays low-cost to taxpayers. It is set by law, and it applies whether you buy, build, improve or refinance with a VA loan.

Two details matter up front: the fee is calculated on your total loan amount, not the purchase price, and you can either pay it at closing or finance it into the loan.

The 2026 VA Funding Fee Chart

Your percentage depends on three things: the type of loan, whether this is your first VA loan use or a subsequent one, and your down payment. The rates below come from the VA’s own published funding fee chart (effective April 7, 2023, and unchanged since).

Purchase and construction loans

One quirk worth flagging: if you used a VA loan in the past only to buy a manufactured home, the VA still treats your next home loan as a first use.

Cash-out refinance loans

A VA cash-out refinance is 2.15% on a first use and 3.30% after first use. Unlike a purchase, the down payment does not change these rates.

Other VA loan types

• Interest Rate Reduction Refinancing Loan (IRRRL): 0.50%
• Manufactured home loan (not permanently affixed): 1.00%
• Loan assumption: 0.50%
• Native American Direct Loan (NADL): 1.25% to purchase, 0.50% to refinance
• Vendee loan, for buying a VA-acquired property: 2.25%

Who Is Exempt From the VA Funding Fee

The VA itself lists the exemptions, and they are more specific than most buyers expect. You do not pay the funding fee if any of these describe you:

• You receive VA compensation for a service-connected disability.
• You are eligible to receive that compensation, but you are taking retirement or active-duty pay instead.
• You receive Dependency and Indemnity Compensation (DIC) as the surviving spouse of a veteran.
• You are a service member with a proposed or memorandum rating before the closing date that makes you eligible for compensation on a pre-discharge claim.
• You are on active duty and provide evidence on or before the closing date that you received a Purple Heart.

Notice what is not on that list: an undecided claim with no proposed rating yet. The exemption has to be documented before closing. If your status is in limbo, that is exactly the kind of thing to settle before you get to the closing table.

How the Fee Is Calculated — and Why Your Down Payment Matters

Take the VA’s own example: a $200,000 home with a $10,000 down payment (5%). Your loan amount is $190,000, so a first-use fee of 1.5% comes to $2,850. The fee applies to the loan amount, not the purchase price.

That leaves two levers. The first is first use versus subsequent use. The second is down payment. On a first-use purchase, going from nothing down to 5% drops the fee from 2.15% to 1.5%; getting to 10% takes it to 1.25%. The gap is much wider on a repeat use, where 5% down cuts the fee from 3.30% to 1.50%. If you have used your VA entitlement before, the down payment discussion is where the real savings are.

Can You Get the Funding Fee Refunded?

Sometimes. If you are later awarded VA compensation for a service-connected disability, and the effective date of that award is retroactive to before your loan closing, you may qualify for a refund of the funding fee. If you get a proposed or memorandum rating after closing, you still owe the fee and cannot get it back on that basis. If you think you qualify, start with your VA regional loan center.

What This Means on a Fort Hood Purchase

In this market, a large share of buyers are using VA loans, so the funding fee is a normal line item on a Killeen, Harker Heights or Copperas Cove purchase. On a first purchase with nothing down, it adds 2.15% to the loan you carry. Financed, that is not cash out of your pocket at closing, but it is principal you pay interest on for the life of the loan.

Two practical moves follow. First, if there is any question about your VA disability status, get it resolved with the VA before closing — a rating that shows up afterward does not remove a fee you already paid unless it is retroactive. Second, if you can put 5% down, run both scenarios with your lender: the lower fee sometimes beats keeping that cash liquid.

And for sellers reading this: a VA buyer’s funding fee has nothing to do with you, but the appraisal that comes with a VA loan does. If you are selling to a VA buyer near Fort Hood, start with what sellers need to know about VA appraisals.

Plan the Numbers Before You Write the Offer

Funding fee questions are best answered before you fall in love with a house, not at the closing table. At pre-approval we can pull your VA entitlement, confirm first use versus subsequent use, and work out whether financing the fee or paying it makes more sense for you. If you are still deciding how to structure the purchase, the broader walkthrough on buying a home with a VA loan in Texas is a good next read, along with a plain-English rundown of VA loan updates for 2026. Veterans with a service-connected rating should also look at Texas property tax exemptions for veterans — that is where a lot of the ongoing, year-after-year savings actually live.