VA Funding Fee for San Diego Buyers: Who Pays, Exemptions, Financed vs Cash
Quick answer: The VA funding fee is a one-time charge on most VA purchase and cash-out loans. You usually pay it, either in cash at closing or financed into the loan. Many San Diego veterans skip it entirely because they receive VA disability compensation or meet another exemption. If you are not exempt, the 2026 first-use purchase rate is 2.15% of the loan amount with under 5% down (3.3% on subsequent use), and 5% down drops both to 1.5%.
VA is still the best first call for eligible buyers around Camp Pendleton, Miramar, and 32nd Street. Zero down and no monthly MIP or PMI is the headline. The funding fee is the line that surprises people on the Loan Estimate. Left Coast Leaders, Inc. (NMLS #2394495) prices it as cash, financed, or seller-paid before you write an offer in Oceanside, Chula Vista, or Poway.
This page is the fee, not the full VA loan overview. If you are still choosing a program, read VA vs conventional after you know whether the fee applies to you.
What the VA funding fee is (and what it is not)
The fee is a one-time VA charge that helps keep the guaranty program running without monthly mortgage insurance. It is not PMI. It is not FHA upfront MIP, even though both can be rolled into the loan. It does not last for the life of the loan. You pay it once per loan.
It shows up on purchase, construction, and most cash-out refinance files. A VA IRRRL (streamline refinance) uses a much smaller 0.50% fee. Confirm the factor on your Loan Estimate. VA publishes the table; lenders do not invent it.
2026 VA funding fee chart (purchase and construction)
Rates below are the VA purchase and construction factors in effect for 2026. They have been stable since the Blue Water Navy Act schedule. Always match them to your COE (first use vs subsequent) and your actual down payment.
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% (including $0 down) | 2.15% | 3.30% |
| 5% to 9.99% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
Cash-out refinance uses 2.15% (first) or 3.30% (subsequent), with no down-payment discount. IRRRL is 0.50% either way. If your only prior VA loan was a manufactured home that was not permanently affixed, VA may still treat you as first use. We check that on the COE, not by memory.
Who pays it on a San Diego purchase
The veteran or eligible borrower is responsible for the fee unless an exemption applies. Three practical ways it gets paid:
- Financed into the loan. Most common. Cash to close stays lower. You pay interest on the fee for as long as you keep the mortgage.
- Paid in cash at closing. Smaller loan, slightly lower payment. Makes sense when you have extra cash after reserves and moving costs.
- Seller-paid as a concession. Common in slower San Diego pockets and on new construction. It has to fit VA concession rules and the appraisal.
A gift can cover cash to close, including a cash funding fee, if the gift meets VA and California gift-fund documentation. The fee itself is still your fee. The donor is not "paying VA." They are giving you cash.
Who is exempt (this is the real money in this county)
If you are exempt, the fee is $0. On a typical San Diego VA purchase that is a five-figure difference, not a rounding error. VA lists the main categories:
- You receive VA compensation for a service-connected disability.
- You are eligible for that compensation but receive retirement or active-duty pay instead.
- You are a surviving spouse receiving Dependency and Indemnity Compensation (DIC).
- You are a service member with a proposed or memorandum rating before closing on a pre-discharge claim.
- You are on active duty and provide evidence of a Purple Heart on or before closing.
A 10% rating can be enough. Non-service-connected disability is not. The COE is what underwriting uses. If your rating is in process, we still close when the rest of the file is ready, and VA can refund a fee that should not have been charged once the exemption is documented. Do not skip the COE pull at pre-approval.
Financed vs cash: San Diego math on $900,000
Use a local price. $900,000 is a realistic VA purchase in Eastlake, Oceanside, or parts of Escondido, still under the 2026 San Diego high-cost conforming limit of $1,104,000 for a 1-unit home if the loan stays in that bucket.
| First use, $0 down | First use, 5% down | Subsequent, $0 down | |
|---|---|---|---|
| Down payment | $0 | $45,000 | $0 |
| Base loan | $900,000 | $855,000 | $900,000 |
| Funding fee rate | 2.15% | 1.50% | 3.30% |
| Fee (before rounding) | $19,350 | $12,825 | $29,700 |
| Loan if fee is financed | About $919,350 | About $867,825 | About $929,700 |
Two takeaways. First, financing a first-use fee on $900,000 is about $19,350 added to the balance. At a mid-6% rate that is roughly $120 a month, not a second mortgage. Paying it cash saves that interest and keeps the loan smaller. It does not change the fact that VA still has no monthly PMI.
Second, subsequent use with zero down is the expensive cell: $29,700. Putting 5% down drops that fee to 1.50%, same as first use at 5%. On subsequent-use files we always price 0%, 5%, and 10% down on the same day. First-use buyers with thin cash usually finance 2.15% and keep reserves. Subsequent-use buyers should look hard at 5% if the cash exists.
If the loan amount plus financed fee pushes you from high-balance conventional territory into jumbo pricing at another lender, that is a structure problem, not a VA problem. Full entitlement does not impose a VA loan-limit cap, but the investor still has a rate sheet. We run the number both ways.
How we handle the fee on a live file
- COE first. Exemption yes or no. First use or subsequent. Residual entitlement if you still own a VA-financed house.
- Same purchase price, same tax and insurance estimate, same HOA. San Diego property tax and Mello-Roos go in every column.
- Fee cash vs financed vs seller-paid. Plus a conventional quote so you can see VA without pretending the fee is free.
- If you might refinance later, we still count the financed fee in today's payment. You do not get that principal back just because you do an IRRRL.
Amir Nurani (NMLS #197458) will not tell you the funding fee is "just closing costs." On a $900,000 San Diego purchase it is a five-figure line. Use the payment calculator for principal and interest, then add the fee treatment we quote from your COE, not a national blog average.
Frequently asked questions
Often yes, as a seller concession, if the contract and VA rules allow it. VA caps certain concessions at 4% of reasonable value. That bucket can include the funding fee, buydowns, and some prepaid items. Normal seller-paid closing costs usually sit outside that 4% cap. Get it written into the offer, then confirm it still fits after the appraisal.
No. Financing it adds the fee to the loan balance so you pay it back over time with interest. Paying cash at closing keeps the loan smaller. There is not a second VA funding fee later just because you rolled the first one in. A later VA cash-out or a new purchase can trigger its own fee unless you are exempt.
Pull your Certificate of Eligibility. If the COE shows a funding-fee exemption, we do not collect the fee. Disability compensation is the usual path, but the COE is the document underwriting uses, not a verbal claim. If a rating is pending, tell us before closing so we can plan a refund path if the exemption posts after funding.
Want the funding fee priced on your San Diego VA purchase?
We will pull the COE, check exemption status, and show cash vs financed vs seller-paid on the same house.
Get Pre-Approved(619) 366-9494 · Amir Nurani · NMLS #197458
Left Coast Leaders, Inc. · NMLS #2394495 · DRE #02191517 · Equal Housing Lender · San Diego, CA