Introduction
Here's a common myth: your VA funding fee changes depending on which state you buy in. It doesn't.
The VA funding fee is set by federal rules, not state law. What does change from state to state is everything around it: property prices, transfer taxes, title charges, recording fees, and local lender costs.
Two borrowers with identical VA loans in Georgia and California can walk away from closing with very different cash to close numbers, even though their funding fee percentage is the same.
This article breaks down VA loan eligibility, how the funding fee actually works, what varies by state (and what doesn't), and how to compare Loan Estimates so you're evaluating apples to apples.
Key Takeaways
- The VA funding fee follows a national schedule, not a state by state one; always confirm current rates before closing.
- Eligibility requires qualifying military service (or spouse status), a Certificate of Eligibility, and lender approval.
- State differences hit your closing costs and taxes, not your VA funding fee percentage.
- Disability compensation, Purple Heart status, and certain surviving spouses may qualify for a funding fee exemption.
What Are the Requirements for a VA Loan?
Two separate approvals happen here. The VA confirms you're eligible for the benefit. Your lender decides whether you qualify for the loan. Meeting one doesn't automatically satisfy the other.
Who Qualifies for VA Benefit Eligibility
Service requirements vary by era and status. According to VA's eligibility guidance, for service from August 2, 1990, to the present, qualifying paths include:
- 24 continuous months of active duty, or the full period you were ordered to serve
- At least 90 days of active duty
- Fewer than 90 days if discharged for a service connected disability
National Guard and Reserve members qualify through different combinations, typically 90 days of active duty service or six creditable years of service. Surviving spouses may qualify if the veteran died in service, died from a service connected disability, or was MIA or a POW.
Getting Your Certificate of Eligibility
The Certificate of Eligibility (COE) proves to your lender that you meet the VA's basic requirements. You can request it three ways:
- Online through VA.gov
- Through your lender, who can retrieve it via the VA's Web LGY system
- By mail, using VA Form 26-1880
Don't wait until you have the COE in hand to start shopping for a lender. Missing paperwork rarely stops the process. Most lenders can begin working with you while it's pending.
Financial Qualification: The Lender's Side
Once eligibility is documented, your lender still has to underwrite the loan. The VA doesn't set a minimum credit score—your lender does, and requirements vary widely. Underwriters typically look at:
- Credit history and score (lender specific minimum)
- Stable, verifiable income
- Debt-to-income ratio (VA flags DTI above 41% for closer review unless residual income is strong)
- Residual income, which the VA weighs more heavily than DTI alone
- Assets and reserves
Property and Occupancy Rules
The home generally has to be your primary residence, not a vacation property or straight rental investment. It also needs to meet VA minimum property requirements for safe water, sanitation, and structural soundness.
Prior VA loan use, remaining entitlement, and discharge circumstances can all affect how much you can borrow. Discuss your specific history with a loan officer early.
How Does the VA Funding Fee Work?
The funding fee is a one time charge that supports the VA loan program. It's the trade off for skipping monthly private mortgage insurance, something most VA borrowers never pay. The fee is charged separately from your lender's fees and any state-specific closing costs.
Current VA Funding Fee Schedule
Per VA's official funding fee table, effective April 7, 2023 (confirm the current version before closing, as VA updates this periodically):
| Loan Type | Down Payment | First Use | Subsequent Use |
|---|---|---|---|
| Purchase/Construction | Less than 5% | 2.15% | 3.30% |
| Purchase/Construction | 5% to less than 10% | 1.50% | 1.50% |
| Purchase/Construction | 10% or more | 1.25% | 1.25% |
| Cash Out Refinance | N/A | 2.15% | 3.30% |
| IRRRL (Interest Rate Reduction Refinance) | N/A | 0.50% | 0.50% |
Illustrative example only: On a $300,000 purchase with no down payment and first time VA use, a 2.15% fee equals $6,450. This is not a personalized quote—your actual fee depends on down payment tier, use history, and exemption status.
Payment Options
You can handle the funding fee in one of two ways:
- Pay it in cash at closing
- Roll it into your loan balance
Financing it raises your principal, so monthly payments run slightly higher and you pay more interest over the life of the loan. For a purchase or construction loan, the funding fee is typically the only fee the VA allows you to finance into the loan amount.
Who's Exempt
You may qualify for a full funding fee waiver if you're:
- Receiving VA service connected disability compensation
- Eligible for that compensation but receiving retirement or active duty pay instead
- An active duty member with a qualifying pre-discharge disability rating
- An active duty Purple Heart recipient (with evidence provided by closing)
- A surviving spouse receiving Dependency and Indemnity Compensation (DIC)
Don't assume you qualify. Confirm your exemption status with your lender using current VA documentation, since eligibility hinges on specific circumstances.
Your state doesn't change any of the percentages above. What it changes is everything that surrounds the loan.
Comparing VA Loan Costs Across States
To compare states fairly, hold the variables constant. Keep the same loan type, occupancy, down payment, funding fee status, credit profile, and estimated property value. Then look at what actually shifts.
What Varies by State or Locality
- Real estate transfer taxes — some states charge a percentage of the sale price; others charge flat recording fees
- Title insurance — state insurance regulators govern rates, and some states bundle search and closing costs into the filed premium while others don't
- Settlement and escrow charges — attorney state versus title company state practices affect who charges what
- Property tax prorations — higher tax states mean more prepaid escrow at closing
- Recording fees — county level, and they add up
- Appraisal fees and lender charges — can vary by market demand and lender overhead
Home prices and local property tax rates matter just as much. A $400,000 home in a low-tax state might cost less at closing than a $250,000 home in a high property tax county, even with an identical funding fee percentage.
Build a Comparison Worksheet
Track these columns side by side for any state to state comparison:
- Purchase price and loan amount
- Funding fee (percentage and dollar amount)
- Lender origination charges
- Title and settlement costs
- Government recording or transfer charges
- Prepaid items (taxes, insurance)
- Seller credits
- Estimated cash to close
Avoid assuming every borrower in a given state pays identical charges. County-level fees and lender pricing both create variation within the same state.
Seller Credits, Points, and Rate Choices
Seller concessions, lender credits, and discount points can all shrink your upfront cost. But a lower cash to close number doesn't always mean a lower total cost. Buying down your rate with points, for instance, raises upfront costs but can reduce what you pay over the loan's life.
According to the CFPB's guidance on comparing multiple Loan Estimates, request the same loan type and features from each lender. Review standardized Loan Estimates—not headline rates advertised online. Advertised rates depend on your credit profile, the lender's pricing that day, and how long you lock your rate.
Other Costs to Compare Besides the Funding Fee
VA loans skip monthly mortgage insurance, but that's not the same as skipping all fees. Separate recurring costs from one time closing costs when you're budgeting.
Recurring monthly costs (principal, interest, taxes, and insurance—PITI):
- Principal and interest
- Property taxes
- Homeowners insurance
- HOA dues, if applicable
- Flood insurance, if your property sits in a flood zone
One time closing costs:
- Origination and underwriting fees
- Appraisal and inspection charges
- Title and escrow fees
- Prepaid interest and insurance
- Recording and transfer charges
VA rules cap what lenders can charge borrowers directly. Reasonable, customary fees are allowed, plus a flat lender charge up to 1% of the loan amount. Duplicate charges and certain fees—such as lender attorney costs—aren't permitted.
Seller concessions can also cut what you bring to closing. They generally cover up to 4% of the property's value for items beyond standard closing costs and discount points.
Discount points, lender credits, and the decision to finance your funding fee all shift the balance between what you pay now versus over time. Before you sign, compare your Loan Estimate to the final Closing Disclosure and flag any line that doesn't match what you expected.
How to Apply and Compare Offers
A typical VA loan sequence looks like this:
- Confirm likely eligibility based on your service history
- Request your COE through VA.gov, your lender, or mail
- Gather documentation — pay stubs from the past 30 days, W-2s from the past two years, and recent bank statements
- Get preapproved so you know your realistic price range
- Compare Loan Estimates from at least two lenders using identical assumptions
- Select a property and complete the VA appraisal
- Finish underwriting and review your Closing Disclosure before signing
Questions to Ask Every Lender
- What funding fee percentage are you assuming, and why?
- Am I eligible for any exemption?
- What's the interest rate versus the APR?
- What lender fees, credits, or points apply?
- What's my estimated cash to close and monthly payment?
- Are you licensed to originate loans in the property's state?
This is where a brokerage model can help. Residential One Lending is a mortgage brokerage that works with borrowers on VA and other loan programs, comparing options rather than pushing a single in-house product. Whether you're a first time VA borrower or reusing your entitlement, having someone shop the numbers for you can surface differences that aren't obvious on a single lender's quote sheet.
Access and terms depend on your qualifications and the lender's licensing in your state. Residential One Lending is registered under NMLS #1271616. Verify current licensing status anytime through NMLS Consumer Access.
Don't pick a lender based on one line item. Compare at least two complete estimates covering funding fee, rate, closing costs, and cash to close, using the same assumptions across both.
Frequently Asked Questions
What are the minimum requirements for a VA loan?
You'll need qualifying military service or eligible surviving spouse status, plus a Certificate of Eligibility. You also need lender approval on credit and income, and a primary residence that meets VA property standards.
How much VA loan can I afford?
Affordability depends on income, debts, residual income, credit, assets, remaining entitlement, and rates. Property taxes and insurance in your area matter too—your lender’s underwriting decision sets the final ceiling.
Do VA funding fees differ by state?
No. VA funding fee percentages are set at the federal level and do not change by state. Your upfront cost can still vary with local price, taxes, and whether you finance the fee into the loan.
What disqualifies you from a VA loan?
Common disqualifiers include not meeting service or surviving spouse criteria, an unacceptable discharge status, choosing an ineligible property or occupancy plan, or failing to meet a lender's underwriting standards.
Can I get a VA loan with a 500 credit score?
The VA itself sets no universal minimum credit score, but individual lenders apply their own requirements and typically evaluate your full financial picture, not just your score.
Are there any income limits for VA mortgages?
No, VA loans don't use a blanket income cap. Lenders instead verify that you have stable income, manageable debt, and enough residual income to comfortably support your new mortgage payment.
