VA Loan Guide 2026: Funding Fee, Exemptions & Entitlement

Not financial advice. Educational only. Your lender and VA make the final call on your loan.

The VA home loan is one of the best benefits you earned. In most cases VA's guaranty lets you buy with no down payment, and there's no monthly mortgage insurance. But the rules around the COE, funding fee, and entitlement trip people up. Here's the short version.

Start here: disabled veterans may not pay the funding fee at all

If you receive VA compensation for a service-connected disability, VA says you're exempt from the VA funding fee. That fee can run from 1.25% to 3.3% of the loan amount on a purchase, per VA Circular 26-23-06, Exhibit B (rates for loans closing on or after April 7, 2023 and before November 14, 2031). On a big loan, that's real money.

This isn't a niche case. According to VA data cited by VA News, since 2021 more than half of veterans who got a VA-guaranteed home loan were exempt from paying the funding fee.

Full exemption list and refund rules are below.

What matters with a VA loan

VA doesn't lend you the money (except the Native American Direct Loan). A private lender does. VA guarantees part of it.
Your lender sets the rate, points, and most closing costs. VA says these vary by lender, so shop around.
The funding fee is the big VA-specific cost, and many disabled veterans don't pay it.
Entitlement decides how much you can borrow with no down payment.

Eligibility

Who it's for: service members, veterans, certain Guard and Reserve members, and some surviving spouses.

Per VA:

Service members: at least 90 continuous days of active service.
Veterans (Aug. 2, 1990 to present): at least 24 continuous months, or the full period (at least 90 days) you were called to active duty, or at least 90 days if discharged under a qualifying exception, or less than 90 days if discharged for a service-connected disability. Earlier service periods have different rules; check VA's eligibility page.
National Guard: for example, 90 days of non-training Title 10 active duty, or 6 creditable years (still serving, or discharged honorably/retired). See VA for the full list.
Reserve: 90 days of non-training active duty, or 6 creditable years in the Selected Reserve (still serving, or discharged honorably/retired).

You also have to meet VA and lender credit, income, and occupancy requirements. VA says it doesn't require a minimum credit score, but some lenders do.

Downside: an other than honorable, bad conduct, or dishonorable discharge may make you ineligible. VA says you can still apply and it will review your record.

Getting your Certificate of Eligibility (COE)

The COE shows your lender you qualify. VA lists three ways to request it: online, through your lender (via VA's Web LGY system), or by mail with VA Form 26-1880.

What you'll need, per VA:

Veterans: your DD214.
Active-duty service members: a statement of service signed by your commander, adjutant, or personnel officer, with your name, SSN, date of birth, date you entered duty, any lost time, and the name of the command.
Guard/Reserve: varies; see VA's COE page.

The VA funding fee

This is a one-time fee paid at closing. You can pay it up front or roll it into the loan. VA's chart (effective April 7, 2023, page last updated October 5, 2026):

Purchase and construction loans

Down payment	First use	After first use
Less than 5%	2.15%	3.3%
5% or more	1.5%	1.5%
10% or more	1.25%	1.25%

Cash-out refinance: 2.15% first use, 3.3% after first use. IRRRL: 0.5%. Loan assumptions: 0.5%. Manufactured home (not permanently affixed): 1%. NADL: 1.25% purchase, 0.5% refinance.

The fee is a percentage of the loan amount, not the purchase price. VA's example: a first-time user buying a $200,000 home with $10,000 down pays 1.5% of $190,000, or $2,850.

Who doesn't pay the funding fee

Per VA, you're exempt if any of these are true:

You receive VA compensation for a service-connected disability.
You're eligible for that compensation but get retirement or active-duty pay instead.
You receive DIC as a surviving spouse.
You're a service member with a proposed or memorandum rating, before closing, saying you're eligible for compensation based on a pre-discharge claim.
You're on active duty and show proof of a Purple Heart on or before closing.

If you're later awarded VA compensation with an effective date before your closing, you may be able to get the fee refunded. This is one more reason to file your VA claim before you get out. See my year-before-separation plan.

Entitlement, in plain English

Your COE shows basic entitlement. If it reads $36,000, VA says you have full entitlement and no loan limit, as long as you can afford the loan and the appraisal supports the price. $36,000 isn't what you can borrow. It's the most VA pays your lender on a loan of $144,000 or less. Above $144,000, VA guarantees up to 25% of the loan.

Already used some entitlement? Your remaining bonus entitlement is based on the county loan limit. VA's steps:

Find "Entitlement Charged" on your COE.
Look up the county's One-Unit conforming loan limit on the FHFA website.
Multiply that limit by 0.25.
Subtract step 1 from step 3. Multiply the result by 4 to estimate what most lenders would lend with no down payment.

VA's example: a $900,000 county limit × 0.25 = $225,000, minus $50,000 used = $175,000 remaining, × 4 = $700,000.

Restoring entitlement: VA says you may restore it if you sold the home and paid off the loan, if a qualified veteran assumes your loan and substitutes their entitlement, or (one time only) if you paid off the loan but kept the home.

Closing costs

VA lets sellers pay closing costs. Seller concessions (things like paying your funding fee or paying off your debts) are capped at 4% of the home's reasonable value. On a purchase loan, the funding fee is the only cost you can roll into the loan. Everything else is due at closing.

How I'd choose

If you have a VA disability rating, confirm your funding fee exemption shows on your COE before you compare loan estimates.
If you're still on active duty with a pre-discharge claim, a proposed or memorandum rating before closing can waive the fee. A rating after closing won't.
If you've used your benefit before, do the entitlement math before you start house hunting.
If you're comparing lenders, get Loan Estimates from more than one. VA doesn't set your rate.

VA loan payment calculator: funding fee, disability exemption, and remaining entitlement
Leaving the military financial checklist, including the BDD claim window
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