What Is the VA Loan Funding Fee?
The VA funding fee is a one-time payment that most veterans, active-duty service members, and eligible reservists pay when using a VA-backed home loan. This fee helps sustain the VA loan program so it can continue offering zero-down-payment mortgages without requiring private mortgage insurance (PMI).
If you're buying a home on Oahu using a VA loan, understanding how the funding fee works — and whether you can reduce or avoid it — can save you thousands of dollars at closing or over the life of your loan.
2025 VA Funding Fee Rates for Purchase Loans
The amount you pay depends on three key factors: whether this is your first time using a VA loan, how much you put down, and your type of military service.
First-Time VA Loan Use
- Less than 5% down: 2.15% of the loan amount
- 5% to 9.99% down: 1.50%
- 10% or more down: 1.25%
Subsequent VA Loan Use
- Less than 5% down: 3.30%
- 5% to 9.99% down: 1.50%
- 10% or more down: 1.25%
What That Looks Like on an Oahu Purchase
Oahu's median home price is significantly higher than the national average, which means the funding fee adds up quickly. On a $900,000 home with no down payment, a first-time VA borrower would pay a funding fee of $19,350 (2.15%). A repeat borrower on the same loan would owe $29,700 (3.30%).
Even a modest 5% down payment on that same home reduces your loan to $855,000 and drops the funding fee to $12,825 — a savings of over $6,500 compared to zero down.
Can You Finance the Funding Fee?
Yes. Most borrowers choose to roll the VA funding fee into their loan balance rather than paying it out of pocket at closing. This means you won't need extra cash upfront, but you will pay interest on that amount over the life of the loan.
For example, financing a $19,350 funding fee at a 6.5% interest rate over 30 years adds roughly $44,000 in total interest. If you have the cash available, paying the fee upfront at closing can be the more cost-effective choice.
Who Is Exempt from the VA Funding Fee?
Not everyone has to pay the funding fee. You may qualify for an exemption if you:
- Have a service-connected disability (any VA disability rating)
- Are a Purple Heart recipient currently serving on active duty
- Are a surviving spouse of a veteran who died in service or from a service-connected disability
- Are receiving VA compensation for a pre-discharge disability claim
If you're unsure about your exemption status, check with the VA or ask your lender to verify your Certificate of Eligibility (COE). A disability waiver can save you tens of thousands of dollars on a high-value Oahu purchase.
Other VA Loan Fee Types
VA IRRRL (Streamline Refinance)
The Interest Rate Reduction Refinance Loan carries a flat 0.50% funding fee for all borrowers, regardless of prior usage or service history.
VA Cash-Out Refinance
- First use: 2.15%
- Subsequent use: 3.30%
Tips for Reducing Your VA Funding Fee on Oahu
- Make a down payment. Even 5% down significantly reduces your fee from 2.15% to 1.50% on first use.
- Check your disability status. A VA disability rating of any percentage qualifies you for a full exemption.
- Use your VA loan strategically. First-time use rates are lower than subsequent use, so plan accordingly if you anticipate multiple purchases.
- Ask the seller to pay it. In Hawaii, it's common to negotiate seller concessions that can cover the funding fee as part of closing costs.
Ready to Buy on Oahu with a VA Loan?
The VA funding fee is one of the most important costs to understand before purchasing a home in Hawaii. Whether you're a first-time buyer stationed at Joint Base Pearl Harbor-Hickam, Schofield Barracks, or Marine Corps Base Hawaii, or you're a veteran relocating to the island, knowing your funding fee upfront helps you budget accurately and avoid surprises at closing.
If you have questions about VA loans on Oahu or want to explore your options, contact us for a free consultation. We work with military buyers across the island every day and can connect you with VA-approved lenders who specialize in Hawaii transactions.