How VA Loans Work (Funding Fee, Eligibility & Payments)
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs for eligible service members, veterans, and surviving spouses. The VA guarantee lets private lenders offer no down payment and no monthly mortgage insurance. Instead, most borrowers pay a one-time funding fee of 1.25% to 3.3% of the loan, which can be financed into the balance.
Eligibility and the Certificate of Eligibility
You qualify through service: 90 consecutive days of active duty during wartime, 181 days during peacetime, or six years in the National Guard or Reserves. Surviving spouses of service members who died in service, or from a service-connected disability, also qualify. There is no minimum credit score set by the VA itself, though most lenders require around 620.
Before you apply, you need a Certificate of Eligibility (COE), which confirms your service record and how much entitlement you have. Your lender can usually pull it from the VA's system in minutes; you can also apply on VA.gov or by mailing VA Form 26-1880. Entitlement is reusable: once a VA loan is paid off, usually by selling the home, your full entitlement is restored and you can use the benefit again.
The funding fee, tier by tier
The funding fee is the VA's one-time charge for guaranteeing the loan, and it replaces monthly mortgage insurance. The rate depends on your down payment and whether you have used a VA loan before. It is charged on the base loan amount — the price minus your down payment — not on the purchase price. These rates come from the VA funding fee table on VA.gov, effective April 7, 2023.
Some borrowers pay nothing: you are exempt if you receive VA compensation for a service-connected disability, or would receive it but take retirement or active-duty pay instead; if you are a surviving spouse receiving Dependency and Indemnity Compensation (DIC); or if you are an active-duty service member who received a Purple Heart before closing. Everyone else can finance the fee into the loan — the only closing cost VA rules allow you to finance on a purchase — or pay it in cash at closing. A streamline refinance (IRRRL) carries a flat 0.5% fee.
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.3% |
| 5% or more | 1.5% | 1.5% |
| 10% or more | 1.25% | 1.25% |
What the monthly payment includes
A VA loan payment is principal and interest plus property tax and homeowners insurance, with HOA dues on top when they apply. There is no PMI line — VA loans never charge private mortgage insurance, and the funding fee is what takes its place. If you finance the fee, it joins the loan balance and adds to principal and interest every month for the whole term.
The numbers show the trade. On a $375,000 home with no down payment, first use, 6.5% over 30 years, the 2.15% fee is $8,062.50 and the financed loan is $383,062.50. Principal and interest is $2,421.22 a month; with $4,125 a year of tax and $1,875 of insurance, the total payment is $2,921.22. Paying the fee in cash instead would cut the payment to $2,370.26 and save $10,283.10 of interest over the term.
VA vs FHA vs conventional
For eligible borrowers, VA usually wins on monthly cost: no down payment required, no monthly insurance premium, and rates that typically price below conventional. The main cost is the funding fee, and it is a one-time charge — unlike FHA's annual mortgage insurance premium of 0.55%, which lasts the life of the loan when you put less than 10% down, or conventional PMI at 0.3% to 1.5% a year until you reach 80% loan-to-value.
VA is not always the cheapest route. A subsequent-use borrower putting nothing down pays a 3.3% fee — $12,375 on a $375,000 loan — while a conventional borrower with 20% down pays no PMI and no funding fee at all. And VA loans are for primary residences only, with a VA appraisal that can slow a purchase in a competitive market. If you have a large down payment and strong credit, run both options through the calculators before deciding.
| VA loan | FHA loan | Conventional loan | |
|---|---|---|---|
| Minimum down payment | 0% | 3.5% (580+ credit) | 3% |
| Upfront fee | 1.25–3.3% funding fee | 1.75% upfront MIP | None |
| Monthly insurance | None — no PMI, ever | 0.55%/yr MIP, life of loan below 10% down | PMI 0.3–1.5%/yr below 20% down, cancellable at 80% LTV |
| Who qualifies | Veterans, service members, surviving spouses | Any buyer meeting credit and DTI rules | Any buyer meeting credit and DTI rules |
Questions, answered
Can I use a VA loan more than once?
Yes — there is no limit on how many times you can use the benefit. Once a VA loan is paid off, usually by selling the home, your full entitlement is restored. The cost of reuse is the subsequent-use funding fee: 3.3% with less than 5% down, versus 2.15% on first use. At 5% down both are 1.5%, and at 10% down both are 1.25%.
Is there a maximum loan amount on a VA loan?
The VA sets no maximum loan amount for borrowers with full entitlement. In practice, lenders cap no-down-payment VA loans at the conforming loan limit — $832,750 for a single-family home in most counties in 2026. Above that, the lender typically asks for a down payment on the amount over the limit.
How long does it take to get a Certificate of Eligibility?
Usually minutes. Most lenders can pull your COE from the VA's system while you apply. If the VA needs more documentation, applying online at VA.gov or by mailing VA Form 26-1880 takes longer — days to weeks — so it is worth requesting the COE before you start house hunting.
Can the seller pay my VA funding fee?
Yes, within limits. The VA allows sellers to offer credits toward closing costs, and a credit for the funding fee counts as a seller concession. Concessions are capped at 4% of the home's reasonable value, so on a $375,000 home the seller can contribute up to $15,000 toward your funding fee and other closing costs.
Reviewed by Tahir Shehzad, ACMA. Figures are reviewed against the sources on our methodology page. This guide is education, not personal financial advice.