ReckonBoxWhat a VA loan actually costs each month
A VA loan needs no down payment and charges no monthly mortgage insurance, replacing both with a one-time funding fee that runs from 1.25% to 3.3% of the loan. That fee is the whole trade, and it is the part the payment estimates handle least well.
On a $400,000 home with nothing down at 6.5% over 30 years, a first-use borrower pays a 2.15% funding fee of $8,600. Roll that into the loan and principal and interest come to $2,583 a month. Add property tax and insurance and the payment is $3,058, with no insurance line anywhere in it.
The funding fee, and the 5% that changes it
The VA funding fee depends on three things: whether this is your first VA loan, how much you put down, and whether you are exempt. Per the VA's schedule effective April 7, 2023, a first use with under 5% down is 2.15%, a subsequent use with under 5% down is 3.3%, and 5% down drops either one to 1.5%.
That 5% break is worth spelling out, because no calculator we tore down shows it. Take a subsequent-use borrower on the same $400,000 home. At zero down the fee is 3.3%, or $13,200. Put 5% down and it falls to 1.5% on a smaller loan, or $5,700.
| Subsequent-use funding fee on a $400,000 home | |
|---|---|
| Nothing down, 3.3% | $13,200 |
| 5% down, 1.5% | $5,700 |
| Smaller by | $7,500 |
Ten percent down cuts it further, to 1.25%. The fee never rewards a big deposit the way it rewards clearing the 5% line, where the rate itself steps down.
Why there is no mortgage insurance
A VA loan carries no monthly mortgage insurance of any kind, so nothing recurring is bolted onto the payment. A conventional loan under 20% down charges PMI, and an FHA loan charges a monthly MIP that, at the minimum down payment, never goes away. VA replaces both with the single funding fee.
That is why a VA payment can undercut an FHA or low-down conventional one even when the rate is identical. The insurance the other loans add every month simply is not there. calculator.net and usmortgagecalculator.org model the fee but bury this point; rate.com and Navy Federal do not surface the fee tiers at all.
What financing the fee really costs
Financing the funding fee adds it to the loan balance, so it is repaid with interest over the full term rather than paid once at closing. Most borrowers finance it, and that is fine, but the sticker fee understates the cost.
On the default loan, financing the $8,600 fee costs about $10,969 in interest across 30 years. Its true cost is closer to $19,600 than to $8,600. Paying it at closing avoids that interest, which is the tradeoff the finance-or-pay choice on this page makes visible.
Where the numbers come from
The base loan is the price minus your down payment. The funding fee is that base loan times the rate the VA schedule sets for your use and down payment, and if financed it is added before the payment is computed. Principal and interest follow the standard amortization formula on the financed total. Property tax and insurance are added straight through, with no insurance premium because a VA loan has none.
Exemption sets the fee to zero. It applies to veterans receiving VA compensation for a service-connected disability, those eligible for it but drawing active-duty pay, surviving spouses receiving Dependency and Indemnity Compensation, and Purple Heart recipients on active duty.
What this does not decide for you
Whether a VA loan beats a conventional or FHA one is not a question a payment can answer alone. Eligibility, the rate each lender offers you, how long you will hold the loan, and whether you are exempt from the fee all move the comparison. Weigh this against the FHA loan and its lasting MIP, and the mortgage calculator with its PMI dates, and talk to a lender who handles VA files about your own entitlement.
These figures are the funding fee rates in force since April 2023, and the VA revises them, which is why the tool reads your use and down payment rather than assuming one rate.
Frequently asked questions
How much is the VA funding fee? The VA funding fee on a purchase, per the schedule effective April 7, 2023, is 2.15% of the loan for a first use with under 5% down, 1.5% with 5% to under 10% down, and 1.25% with 10% or more down. A subsequent VA loan with under 5% down is charged 3.3%. On a $400,000 home with nothing down and a first use, the fee is $8,600.
Does a VA loan have monthly mortgage insurance? No. A VA loan carries no monthly mortgage insurance at all. The one-time funding fee replaces the PMI a conventional loan charges below 20% down and the MIP an FHA loan charges, so nothing recurring is added to the payment. On the default $400,000 loan the payment is $3,058 a month with no insurance line.
Does putting 5% down lower the funding fee? Yes, and this is the break most calculators hide. At under 5% down the fee is 2.15% for a first use or 3.3% for a subsequent use, but 5% down drops both to 1.5%. On a $400,000 subsequent-use loan, that is $13,200 at zero down against $5,700 at 5% down, a $7,500 smaller fee.
Who is exempt from the VA funding fee? Veterans receiving VA compensation for a service-connected disability, those eligible for such compensation but receiving active-duty pay, surviving spouses receiving Dependency and Indemnity Compensation, and Purple Heart recipients serving on active duty. An exempt borrower pays a 0% funding fee, whatever the down payment or loan use.
Can I finance the funding fee into the loan? Yes, and most borrowers do, rather than paying it at closing. Financing it adds the fee to the loan balance, so it is repaid with interest over the term. On the default loan, financing the $8,600 fee costs about $10,969 in interest across 30 years, so its true cost is closer to $19,600 than to the sticker $8,600.
What is the funding fee on a subsequent VA loan? A subsequent use of the VA loan benefit is charged 3.3% with under 5% down, against 2.15% for a first use, per the April 2023 schedule. At 5% or more down the subsequent-use fee falls to 1.5%, the same as a first use, so a repeat borrower has a strong reason to put at least 5% down.
How does a VA loan compare to an FHA loan? A VA loan needs no down payment and has no monthly insurance, charging one funding fee instead. An FHA loan needs 3.5% down and charges both an upfront and a monthly MIP that, with under 10% down, never cancels. The FHA calculator prices that side, so the two can be compared directly for a borrower eligible for both.