Reuse Your VA Loan Benefit: Buying a Second Home After Selling the First
Discover how to effectively reuse your VA loan benefit when buying a second home after selling your first.
7 Min
Navigating the world of VA loans can feel like a challenge, with terms and fees that may seem confusing at first. One cost that often surprises borrowers is the VA Funding Fee. This mandatory fee is required for most VA loans, but the good news is that there are ways to manage, reduce, or even avoid it entirely. Eligible veterans, active service members, and surviving spouses may find that, as a veteran, you have access to unique VA loan benefits and potential exemptions that can make home financing more affordable.
This blog will break down everything you need to know about the VA Funding Fee—including what it is, how much it costs, when to pay it, and how you might qualify for exemptions. Plus, we’ll share practical strategies for lowering this fee if an exemption isn’t available to you. Whether you’re buying your first home or refinancing in 2025, understanding this key charge will help you make smarter financial decisions.
VA loans are a unique mortgage option backed by the Department of Veterans Affairs, designed to help eligible veterans, active service members, and surviving spouses achieve homeownership. One of the standout benefits of a VA loan is the ability to purchase a home with no down payment, making it easier for qualified borrowers to get into a home without saving for years. VA loans also come with no private mortgage insurance (PMI) requirement and often feature lower interest rates compared to conventional loans, which can save borrowers thousands over the life of the mortgage.
To keep the VA home loan program running and available to future generations, most borrowers are required to pay a VA funding fee. This one-time fee helps fund the program and allows the Department of Veterans Affairs to continue offering these favorable loan terms. While the VA funding fee is an added cost, the overall benefits of VA loans—such as lower payments, competitive interest rates, and flexible eligibility—make them a top choice for many veterans and their families.
The VA Funding Fee is a one-time fee paid by most borrowers when they secure a VA loan, whether for purchasing a home, refinancing, or other loan types like Native American Direct Loans (NADL) (which are examples of VA direct and VA-backed loans). The VA funding fee is typically paid when the loan closes.
This fee plays a vital role in keeping the VA loan program self-sustaining. Instead of relying on taxpayer dollars, the program generates its funding through the fees paid by borrowers. This ensures that eligible service members, veterans, and their families continue to benefit from significantly reduced upfront costs, including no down payments and no private mortgage insurance (PMI).
The funding fee applies to purchase loans, refinances, and certain specialty loans, including cash-out refinances. However, it does not apply universally. Later in this post, we’ll outline key exemptions and steps you can take to limit its impact on your budget.
The exact cost of the VA Funding Fee depends on a few factors:
Other factors, such as loan purpose, service history, and entitlement, can also influence the VA funding fee. Your entitlement and VA loan entitlement status may affect the VA funding fee rate you receive.
The VA funding fee is calculated as a percentage of the total loan amount, known as the VA funding fee rate. VA funding fee rates vary depending on whether you are making a first-time purchase, refinancing, or using your VA loan benefits again. The VA sets these rates and can change based on your down payment, loan type, and previous use of your entitlement.
Here’s a general breakdown for standard VA loans:
For example, if you’re purchasing a $350,000 home with no down payment on your first loan, your funding fee would be $8,050 (2.3%). If it’s your second loan and you’re still putting no money down, this increases to $12,600 (3.6%).
Some loan scenarios, like cash-out refinances, may come with slightly higher fees. Additionally, rolling the funding fee into your loan will impact your final loan balance.
The VA funding fee is calculated as a percentage of your total loan amount, making the size of your loan a key factor in determining how much you’ll pay. For example, if you’re a first-time VA loan borrower with no down payment, your funding fee will be 2.3% of the total loan amount. If you’re able to make a down payment of at least 5%, the funding fee drops to 1.65%. The more you put down, the lower your funding fee rate.
Your military service history and the type of loan you choose can also affect the funding fee. For instance, repeat VA loan users or those opting for certain refinance loans may see different rates. Understanding how your loan amount, down payment amount, and service history interact to determine your VA funding fee can help you plan your finances and potentially save money when you pay the VA funding fee at closing.
Borrowers typically pay the VA Funding Fee at closing, with lenders responsible for collecting and processing the fee at this stage, but you have options for how to handle it.
If you have the cash available, paying the fee in full at closing avoids adding it to your loan balance.
You can roll the fee into your overall loan balance, spreading the cost out over your monthly mortgage payments. By borrowing the funding fee and including it in your loan, you increase the total amount borrowed, which affects your overall borrowing costs. Keep in mind that financing the fee will slightly increase both your monthly payment and the amount of interest you’ll pay over the life of the loan.
Deciding which payment method works best for you depends on your financial situation. For some, avoiding an upfront out-of-pocket expense is crucial, while others may prefer to avoid higher long-term costs.
Not everyone has to pay the VA Funding Fee. There are VA funding fee exemptions available for certain groups, such as veterans and surviving spouses, based on factors like service-related disability and receipt of VA compensation. If you qualify for specific exemptions, you can save thousands of dollars upfront.
If you’re currently receiving VA disability benefits, you’re exempt from paying the funding fee.
Spouses of veterans who died in service or as a result of service-connected disabilities are eligible for exemption.
If you are an active-duty service member who has been awarded the Purple Heart, you’re also exempt.
To ensure your exemption is applied correctly, make sure your lender has the proper documentation from the VA at least one month before closing. A Certificate of Eligibility (COE) confirming your exemption status is typically required.
Related Reading
Check out our guide on VA Loans vs Conventional Loans in Florida 2025 for tips on when a VA loan might be the smarter choice.
Active duty service members and National Guard members have access to special benefits when it comes to VA loans, including potentially lower VA funding fees. Depending on your loan type and down payment amount, the VA funding fee for active duty personnel and National Guard members can range from as low as 1.25% up to 3.3%. Making a larger down payment can further reduce your funding fee, helping you save on upfront costs.
In addition to reduced funding fees, active duty and National Guard members may qualify for lower interest rates and more flexible loan terms through the VA home loan program. If you’re eligible, it’s important to explore all your options and compare funding fee rates and benefits before choosing your VA loan. Taking advantage of these benefits can make homeownership more affordable and accessible for those currently serving or who have served in the National Guard.
Even if you don’t qualify for an exemption, there are strategies to reduce your VA Funding Fee.
By putting down at least 5% of the home’s purchase price, you’ll see a significant reduction in your funding fee rate. A 10% down payment reduces the fee further. For a VA-backed loan, the funding fee is calculated as a percentage of the loan amount, and making a larger down payment lowers this percentage.
Opt for a VA Interest Rate Reduction Refinance Loan (IRRRL), also known as a “streamline refinance,” to qualify for a reduced funding fee.
Use your VA loan benefits strategically. For example, you might use a VA loan for your first home purchase and switch to a conventional loan to avoid higher fees for repeat use later on. If you choose to roll the funding fee into your loan, it will increase the total amount you pay over the life of the loan.
Related Reading
Learn more about refinancing your Florida mortgage with bad credit in 2025.
When you’re planning to use a VA loan, it’s important to consider how the VA funding fee will affect your monthly payment. Borrowers have the option to pay the funding fee upfront at closing or to finance it into the loan amount. If you choose to finance the fee, it will increase your total loan amount, which means your monthly mortgage payments will be slightly higher. Over the life of the loan, you’ll also pay interest on the funding fee, adding to the overall cost.
Carefully review your financial situation to determine whether paying the funding fee upfront or rolling it into your loan makes the most sense for you. Consider how each option will impact your monthly payments, your budget, and your long-term financial goals. By understanding the effect of the funding fee on your monthly mortgage payments, you can make a more informed decision about your VA loan.
If paying the funding fee upfront feels daunting, rolling it into your loan can be an attractive option. But it comes with trade-offs.
Pro Tip: If you choose to roll the fee into your loan, aim for a shorter loan term or negotiate a lower interest rate to offset the additional costs.
Refinancing your VA loan can be a smart way to lower your interest rate or access your home’s equity, but it’s important to remember that a new VA funding fee may apply. The funding fee for refinancing can range from 0.5% to 3.3% of the loan amount, depending on the type of refinance loan you choose. For example, a VA Interest Rate Reduction Refinance Loan (IRRRL) typically comes with a lower funding fee compared to a cash-out refinance.
You can choose to pay the funding fee upfront or finance it into your new loan, but keep in mind that financing the fee will increase your loan amount and the total interest you pay over time. Before moving forward with a refinance, weigh the potential savings from a lower interest rate or accessing home equity against the cost of the VA funding fee. This will help you determine if refinancing is the right move for your financial situation.
Mistakes happen. If you were incorrectly charged a VA Funding Fee despite qualifying for an exemption, you can file for a refund.
Refunds typically take 30-120 days, so acting promptly can help you recover your funds.
The housing market in Florida poses unique challenges for VA borrowers.
Florida’s rising property insurance costs affect the debt-to-income ratio (DTI) of many homebuyers. Be sure to factor this into your budget.
Cities like Miami and Tampa are known for higher home prices. A funding fee can impact the loan-to-value ratio in competitive markets.
Florida homeowners can also use a VA cash-out refinance to access their home's equity for home improvements. This option allows you to borrow against your property’s value to fund renovations or upgrades.
At Rate Leaf, we specialize in helping Florida homebuyers optimize their loan terms to overcome these challenges.
Don’t underestimate the impact of the VA Funding Fee on your budget. By understanding the fee structure, knowing when exemptions apply, and leveraging strategies to reduce it when possible, you can maximize your VA loan benefits and focus on achieving your homeownership goals.
Need tailored advice or help securing the best terms for a VA loan? Contact our team at Rate Leaf today to get started.
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