VA Funding Fee and Payment System (FFPS)

Updated 2026-05-17

The VA Funding Fee is a one-time, mandatory fee paid by most veteran borrowers who obtain a VA-guaranteed loan (also known as a VA home loan). It is paid to the Department of Veterans Affairs (VA) at loan closing. Its primary purpose is to help offset the cost of the VA Loan Guaranty Program, thereby reducing the cost to U.S. taxpayers and ensuring the program's viability for future generations of Borrower (Consumer) (Index.pdf, 8-1). This fee helps offset the cost of the VA loan program, as VA loans typically do not require a down payment or private mortgage insurance (PMI).

Unless a veteran meets specific exemption criteria, the funding fee must be paid. The VA funding fee is distinct from other loan closing costs and is an important component of the overall Closing Costs associated with VA loans.

The VA Funding Fee Payment System (FFPS) is the Department of Veterans Affairs' (VA) electronic system used by lenders and loan holders/servicers to manage the payment of the VA funding fee and record fee waivers. This system is a crucial component in the process of generating the VA Loan Guaranty Certificate (LGC).

Calculation of the VA Funding Fee

The funding fee is calculated as a percentage of the loan amount, and its specific rate varies based on several factors. Congress periodically changes the funding fee rates.

Key factors influencing the rate include:

• Loan Type:
  • Purchase/Construction Loans
  • Cash-Out Refinancing Loans
  • Interest Rate Reduction Refinancing Loans (IRRRLs) (a flat 0.50% fee applies)
  • Manufactured Home Loans (1% for unaffixed manufactured homes)
  • Loan Assumptions
  • Specific rules also apply to Energy Efficient Mortgages (EEMs) (Index.pdf, 7-19, 7-29).
• Veteran's Service History:
  • Regular Military
  • Reserves/National Guard
• Prior Use of VA Benefits:
  • First-time use of VA home loan benefits
  • Subsequent use of VA home loan benefits
• Down Payment Amount:
  • No down payment
  • 5% or more down payment
  • 10% or more down payment

Funding Fee Rates (Effective April 7, 2023)

Example: For a $200,000 home with a $10,000 down payment (5%), resulting in a $190,000 loan amount, the funding fee would be $2,850 (1.5% of $190,000).

Source: VA.gov

Payment Options for the VA Funding Fee

The VA funding fee can be paid in two ways:

1. Financed into the loan: The fee is added to the loan amount and paid over the life of the mortgage. The VA funding fee can always be financed into the loan amount for all types of VA loans, as detailed in loan-amount-inclusion-va-loans. This means the borrower typically does not have to pay it out-of-pocket at closing (Index.pdf, 8-14).
2. Paid in full at closing: The borrower pays the entire fee upfront at the loan closing.

For cash-out refinance loans, the total loan amount, including the funding fee, may not exceed 100% of the reasonable value as determined by the VA. Any portion of the funding fee that would cause the new loan amount to exceed this limit must be paid at closing. (VA Lenders Handbook 26-7, Topic 1.a, Table 2)

For IRRRLs, borrowers can include this fee in the new loan amount or opt for a higher interest rate to have the Creditor (Lender) pay these costs.

Exemptions from the VA Funding Fee

Certain veterans and Borrower (Consumer) are exempt from paying the funding fee. These include:

• Veterans receiving VA compensation for service-connected disabilities.
• Veterans who would be entitled to such compensation if not for receiving retirement pay, or who are eligible to receive compensation for a service-connected disability but are receiving retirement or active-duty pay instead.
• Veterans rated eligible for compensation based on a pre-discharge examination or other pre-discharge review.
• Veterans entitled to compensation but who are on active duty.
• Purple Heart recipients, provided evidence is presented by the loan closing date.
• Surviving spouses of veterans who died in service or from service-connected disabilities, including those receiving Dependency and Indemnity Compensation (DIC).

Verification of Exempt Status

Lenders must verify exempt status by obtaining one of the following:

• A properly completed and signed VA Form 26-8937, Verification of VA Benefits, indicating the borrower’s exempt status.
• For a veteran who elected service retirement pay instead of VA compensation, a copy of the original VA notification of disability rating and documentation of the veteran’s service retirement income.
• Indications on the Certificate of Eligibility (COE) that the borrower is entitled as an unmarried surviving spouse.

If the borrower’s status is unclear or conflicting information is found, lenders should consult the VA (e.g., the Regional Loan Center) for assistance. If exempt status cannot be verified prior to loan closing, the funding fee must be remitted, and the veteran can request a refund later if eligibility is confirmed.

VA Funding Fee Payment System (FFPS) Functions and Requirements

FFPS ensures timely and accurate collection of the VA funding fee, which helps defray the cost of administering the VA home loan program.

• Funding Fee Remittance:
  • Lenders must electronically remit the VA funding fee via FFPS within 15 calendar days of loan closing.
  • For VA loan assumptions, loan holders or servicers with automatic authority must remit the funding fee to VA within 15 calendar days of loan closing. This also applies to assumptions after an appeal or prior approval.
• Fee Waivers: If an assumer is eligible for a fee waiver, the loan holder or servicer must enter an exempt assumption record in FFPS within 15 calendar days of loan closing.
• Late Fees: Lenders paying the fee more than 15 days late are automatically assessed a four percent late fee. Fees paid more than 30 days late incur an additional interest charge.
• Data Correction and Refunds: Lenders can use FFPS to correct errors in reported loan data, such as the date of loan closing, before the LGC is generated. This also allows for appropriate corrections for miscalculations or if an exempt veteran mistakenly paid the funding fee, leading to refunds.
• Proof of Payment:
  • Lenders are required to print proof of payment from FFPS and submit it with the closed loan package to the VA.
  • Evidence of the funding fee payment, such as a screenshot from FFPS, is a required document in the stacking orders for assumption submissions.
• LGC Generation: Data entered into VA FFPS contributes to the information used to generate the electronic LGC via VA’s webLGY application.

Remittance and Refunds

Lenders are responsible for collecting the funding fee from the borrower and electronically remitting it to the VA via the VA Funding Fee Payment System (VA FFPS) within 15 calendar days of loan closing (Index.pdf, 8-20). Late fees and interest charges apply for delayed remittances.

Refunds are appropriate in cases where an exempt veteran erroneously paid the fee or if an overpayment occurred due to miscalculation. Borrowers may also be eligible for a refund of the funding fee if they are later awarded VA compensation for a service-connected disability, and the effective date of that award is retroactive to before the loan closing date. Lenders use the FFPS to process these refunds, which can be issued as cash or applied against the outstanding loan balance.

Official Resources

• VA.gov - VA funding fee and loan closing costs: https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/
• 38 U.S.C. § 3729
• 38 CFR § 36.4312