Part of the VA loans in Arizona guide, where every rule on this page is cited and dated.
The VA loan has no down payment and no monthly mortgage insurance. It is not free, and the funding fee is where the cost sits.
It is also where a meaningful number of veterans overpay, because an exemption they qualified for was never applied.
What it is
A one-time fee paid to the VA, which funds the guarantee that makes the whole program possible. It is generally expressed as a percentage of the loan amount, and the percentage depends on your situation rather than being one number for everybody.
What moves it:
- Whether this is your first use of the benefit or a subsequent use. Later uses generally cost more.
- Whether you make a down payment. Putting money down reduces the fee, which is one of the few reasons a VA borrower might choose to.
- The type of transaction. A purchase, a cash-out refinance and an IRRRL are treated differently, and the IRRRL fee is substantially lower.
It can be financed into the loan rather than paid in cash, which is what most borrowers do. That keeps the zero-down structure intact and means the fee shows up as a slightly larger balance rather than money at the closing table.
The exemption
This is the part to read twice.
A veteran receiving VA compensation for a service-connected disability is generally exempt from the funding fee entirely. Not reduced. Exempt.
Also generally exempt: certain surviving spouses, and veterans who would be entitled to compensation but for receiving retirement or active duty pay.
On a typical Arizona purchase that is thousands of dollars that simply are not charged.
Why it gets missed. The exemption has to be identified and documented. Your Certificate of Eligibility generally reflects exempt status, but a file processed quickly by someone who has not done many VA loans can run straight past it. I have seen it happen.
Three situations worth raising directly:
You have a rating but have never mentioned it. Say so on the first call.
You have a claim pending. This matters. If a rating is awarded that is retroactively effective, a fee you already paid may be refundable. Do not assume a pending claim is irrelevant to your closing.
You are a surviving spouse. See The Surviving Spouse Benefit.
Put it in context before you flinch at it
The fee is a real cost and it is worth comparing honestly against the alternative rather than in isolation.
An FHA borrower pays an upfront premium and an annual premium that, above a certain loan-to-value, runs for the life of the loan. A conventional borrower under twenty percent down pays mortgage insurance monthly until it can be cancelled.
A VA borrower pays the funding fee once and then pays no monthly mortgage insurance at all, ever.
Over any meaningful holding period that is not a close comparison. See VA versus FHA versus Conventional.
What to do
- Disclose any disability rating or pending claim on the first call.
- Check your Certificate of Eligibility for exempt status, and ask your lender to confirm they have read it.
- Ask whether financing the fee or paying it in cash is better for your situation. Financing preserves cash; paying it keeps the balance down.
- Ask whether a down payment would reduce the fee enough to be worth making, which occasionally it is.
- If you paid a fee and a rating was later awarded retroactively, ask about a refund. Nobody will raise this for you.
Why bring a VA file to us
- We quote the rule and the overlay separately. VA sets the floor. Your lender sets what they will actually do. Those are different numbers and only one of them decides your file.
- Broker model. When a lender's overlay is the obstacle rather than VA's rule, the fix is moving the file, not fixing you.
- We do not treat the VA loan as the fallback. No down payment, no monthly mortgage insurance and an assumable note is the strongest financing available to most buyers who have earned it.
- You talk to the principal. Ricky Khamis is President of EPiQ Lending, NMLS #173141, lending in Arizona since 1999 and a 2025 Presidents Club Winner at CMG Home Loans. Direct line: (480) 999-9842.
EPiQ Lending is NMLS #1936984, at 7975 N. Hayden Road, Suite A-101 in Scottsdale. Verify all of it before you trust any of it: Ricky's EPiQ Lending profile, the Scottsdale branch, and the license itself at NMLS Consumer Access. Hold every lender to that standard, including us.
Send me your Certificate of Eligibility, or let me pull it, and I will tell you what your entitlement actually supports.
Equal Housing Opportunity. This is general information, not a commitment to lend or an offer to extend credit. The VA home loan program is administered by the U.S. Department of Veterans Affairs; loans are made by private lenders, not by the VA, and this site is not endorsed by or affiliated with the VA or any government agency. Eligibility, entitlement, funding fee amounts and exemptions are determined by the VA based on your service record and disability status. Program requirements are set out in the VA Lenders Handbook and change over time, and individual lenders routinely impose requirements stricter than the VA's published minimums. Any figures shown are illustrative, are not a quote, and are not a projection of investment returns. Rental income, property appreciation and refinancing availability are not guaranteed. Rates, terms and program guidelines change and depend on credit approval, property appraisal and other qualifying factors. Not all applicants will qualify. This is not legal, tax or investment advice.
Looking at a specific home? Send me the address and I will run the numbers: rickykhamis.com/analyze
