MW
Michael Wagner, NMLS #89234
Senior VA Loan Specialist | 15+ Years Experience
Former US Army Captain | VA Loan Expert serving Nevada veterans since 2009

VA Loan Funding Fee Explained: What Nevada Veterans Need to Know

The VA funding fee is a one-time charge that helps sustain the VA loan program for future generations of veterans. While it adds to your upfront costs, many veterans can finance it into the loan—and some are completely exempt. This comprehensive guide breaks down 2025 VA funding fee rates, exemptions, and strategies to minimize this cost for Nevada service members.

2.15%
First-Time Use
0% Down
3.30%
Subsequent Use
0% Down
100%
Disabled Veterans
Exempt
Us Veteran woman homecoming. Young woman coming back to her family from military service for holidays. Female soldier going back home to spend time with relatives.

What Is the VA Funding Fee?

The VA funding fee is a one-time percentage-based charge applied to VA-backed home loans. It's the Department of Veterans Affairs' way of offsetting the cost of the loan program to taxpayers. Unlike conventional loans that require mortgage insurance (PMI) or FHA loans with MIP, the VA funding fee is paid just once—either upfront at closing or rolled into the loan amount.

The fee varies based on three key factors: (1) military service category, (2) down payment amount, and (3) whether it's your first or subsequent use of the VA loan benefit. For example, a first-time user putting zero down pays 2.15% of the loan amount, while a subsequent use with 0% down jumps to 3.30%.

Important Points About the VA Funding Fee

  • Can be financed: Roll the fee into your loan amount—you don't have to pay it out of pocket at closing
  • Lower with down payment: Putting down 5% or 10% significantly reduces the fee percentage
  • Exemptions exist: Veterans with service-connected disabilities (10% or higher) and surviving spouses pay $0
  • Nevada property tax offset: While you pay the funding fee, Nevada has no state income tax—saving veterans thousands annually

2025 VA Funding Fee Rates: Complete Breakdown

Loan Type Down Payment First Use Subsequent Use
Purchase 0% Down 2.15% 3.30%
5-9% Down 1.65% 1.65%
10%+ Down 1.25% 1.25%
Refinance (IRRRL) N/A 0.50% 0.50%
Cash-Out Refinance N/A 2.15% 3.30%
National Guard/Reserve members: Add 0.25% to rates above (unless called to active duty for 90+ days)

Example calculation: On a $400,000 Nevada home purchase with 0% down (first use), the funding fee would be $8,600 (2.15% × $400,000). If financed into a 30-year loan at 6.5% interest, it adds approximately $54/month to your payment.

Who Is Exempt From the VA Funding Fee?

Certain veterans and service members qualify for a complete exemption from the VA funding fee, potentially saving thousands of dollars. If you fall into any of these categories, you'll pay $0 funding fee:

Service-Connected Disability

Veterans receiving VA disability compensation for a service-connected disability (10% rating or higher). This is the most common exemption.

Nevada veteran? Approximately 23% of Nevada veterans qualify for disability exemption.

Surviving Spouse

Surviving spouses of veterans who died in service or from a service-connected disability, and who are receiving Dependency and Indemnity Compensation (DIC).

Important: Must have DIC eligibility letter from VA.

Purple Heart Recipients

Veterans who received the Purple Heart medal are automatically exempt, regardless of disability rating.

Nevada has 6,000+ Purple Heart recipients.

VA Compensation Eligibility

Veterans entitled to receive VA disability compensation but who are not yet receiving it due to receiving retirement or active duty pay instead.

Applies to: Recently retired or transitioning service members.

How to Claim Your Exemption

  1. 1 Obtain documentation: Get your VA disability award letter, Purple Heart certificate, or DIC eligibility letter
  2. 2 Provide to lender: Submit documentation during the loan application process (we'll handle the rest)
  3. 3 Verification: Lender confirms exemption with VA and adjusts your closing costs accordingly
  4. 4 Save thousands: On a $400K loan, exemption saves $8,600 upfront or ~$54/month if financed

Should You Finance the Funding Fee or Pay It Upfront?

Most Nevada veterans choose to finance the funding fee into their loan amount because VA loans already offer $0 down—paying thousands upfront defeats that advantage. However, there are scenarios where paying upfront makes sense:

Finance It (Most Common)

Best for: Veterans maximizing cash at closing, first-time buyers, or those planning to stay 5+ years

  • Keep your cash for furniture, repairs, or emergency fund
  • Low monthly impact (~$54/month on $8,600 financed)
  • Tax-deductible interest on the financed portion
  • Inflation works in your favor over 30 years

Pay Upfront

Best for: Veterans with ample cash reserves planning to sell within 3-5 years

  • Avoid paying interest on the funding fee over 30 years
  • Lower loan-to-value ratio (better for refinancing later)
  • Smaller monthly payment from day one
  • Build equity faster in competitive Nevada markets

Nevada veteran pro tip: If you're stationed at Nellis AFB or Fallon NAS and might PCS within 3 years, paying upfront could save you ~$1,500-2,000 in interest. But if you're settling in Henderson or Las Vegas long-term, financing preserves cash for Nevada's growing housing market.