VA Funding Fee in Texas 2026: What Every DFW Veteran Needs to Know Before Closing

What is the VA funding fee in Texas in 2026?

The VA funding fee in Texas follows national rates set in April 2023, unchanged for 2026. First-time VA loan users putting zero down pay 2.15% of the purchase price; subsequent use at zero down is 3.30%. Veterans receiving VA compensation for a service-connected disability pay nothing. The fee can be financed into the loan balance rather than paid in cash at closing.

By Paul Blair | November 7, 2026

Most veterans know VA loans don't require a down payment or private mortgage insurance. The funding fee is the part that tends to catch people off guard. It shows up on your Loan Estimate, sometimes for the first time just days before closing.

It's a one-time charge, not a recurring cost. But on a $450,000 home in Plano or McKinney with zero down on a first use, the fee runs close to $10,000. At subsequent use, it's nearly $15,000. Those are numbers worth knowing going in, not at the closing table.

What Is the VA Funding Fee?

The funding fee is a one-time charge that helps keep the VA Home Loan program self-funded. It's not PMI. It doesn't recur monthly. It's a percentage of your loan amount, paid at closing or financed into the balance.

The 2026 rates are unchanged from the schedule that took effect in April 2023:

Purchase and construction loans:

• Zero down, first use: 2.15%
• Zero down, subsequent use: 3.30%
• 5% to 9.99% down (any use): 1.50%
• 10% or more down (any use): 1.25%

Refinance loans:

• IRRRL (streamline refinance): 0.50% flat
• VA cash-out refinance: 2.15% first use / 3.30% subsequent use

On a $400,000 home with zero down on your first VA loan, the fee is $8,600. On a $500,000 home at subsequent use, it's $16,500. These are real closing-cost lines on your Loan Estimate, and they affect what you need to bring to closing or how much you're borrowing.

For veterans looking to lower their rate on a home they already own, the IRRRL is typically the most affordable refinance path. We covered that process in VA IRRRL in Texas: How DFW Veterans Can Lower Their Mortgage Rate.

Who Is Exempt from the VA Funding Fee?

This is the part many veterans find out too late.

If you're receiving VA compensation for a service-connected disability, you don't pay the funding fee. The exemption is complete. No percentage, no line item, no rolling it into the loan. The fee simply doesn't apply.

Three categories of borrowers qualify:

• Veterans receiving VA disability compensation for a service-connected condition
• Purple Heart recipients currently on active duty
• Surviving spouses receiving Dependency and Indemnity Compensation (DIC)

How it shows up at closing: Your Certificate of Eligibility reflects your exemption status. Your lender pulls the COE early in the process. If you're exempt, the funding fee disappears from your Loan Estimate automatically.

If you have a pending disability claim when you close, you're not yet exempt. You'll pay the fee at closing. If your claim is later approved with an effective date that falls on or before your closing date, you can request a full refund. That process is covered in detail below.

On the exact threshold: Some lenders specify a 10% or higher service-connected rating as the floor for the exemption. Others say any rating where compensation is being paid qualifies. Sources genuinely disagree on this point. The clearest path is to give your VA award letter to your lender at the start of the process and let them pull the COE directly. Don't assume you're exempt without confirming, and don't assume you're not exempt without checking.

The Texas property tax connection: Texas veterans with a 100% service-connected disability rating pay zero property taxes on their primary residence. Partial exemptions apply at lower rating levels. The same population that qualifies for the funding fee waiver often qualifies for significant property tax relief at the same time. For a full picture of how VA loan benefits stack in this market, see our guide to VA loans in Dallas-Fort Worth.

Should You Finance the Fee or Pay It at Closing?

You have a choice. The VA allows you to roll the funding fee into your loan balance rather than paying it in cash at closing.

Financing the fee means your out-of-pocket closing costs are lower, but your balance goes up. On a $9,675 fee financed into a 30-year loan at 6.5%, you'll pay roughly $450 per year in interest on that amount. Over a typical DFW hold period of 7 years, that adds around $3,150 in additional interest paid.

If you're tight on cash at closing, financing makes sense. If you can pay at closing and you're planning to hold the home for more than 5 or 6 years, paying out of pocket saves a meaningful amount. It's a quick calculation worth running with your lender before you go under contract.

First Use vs. Subsequent Use

The jump from 2.15% to 3.30% isn't a penalty. It reflects the program's funding structure for repeat users.

Subsequent use applies any time you've used a VA loan before. If you bought near Fort Hood or in San Antonio on a VA loan, sold the property, had your entitlement restored, and are now buying near NAS JRB Fort Worth or in the Plano and McKinney corridor, your new purchase is subsequent use.

Entitlement restoration is available after a prior VA loan is paid off and the property is sold. It runs through the VA and typically takes a few weeks. Once restored, your COE reflects the available entitlement, but the subsequent-use rate still applies.

If you currently have an active VA loan and are purchasing a second property using remaining entitlement, you're also in subsequent-use territory. Your lender checks the COE at the start of the process and flags your status. If your entitlement is unclear, that's the point to resolve it.

If You Paid the Fee and Got a Disability Rating After Closing

This situation is more common than most people realize. The VA OIG identified roughly 250 veterans in a recent audit period who were owed funding fee refunds due to retroactive disability determinations.

The scenario is straightforward: you close on a VA purchase with a pending disability claim, pay the funding fee, and months later receive a VA disability rating with an effective date that falls on or before your closing date.

If that effective date is on or before your closing date, you're entitled to a full refund of what you paid.

Here's the process:

1. Get your VA rating decision letter. It shows your effective date.
2. Contact your mortgage servicer (not the VA directly) and let them know you're entitled to a funding fee refund.
3. Provide the decision letter showing the effective date was on or before your closing date.

The servicer handles the refund from there. The key variable is the effective date on the award letter. If your effective date falls after your closing date, the refund doesn't apply. And if you've never filed a disability claim and believe you may have a service-connected condition, it's worth consulting with a VA benefits advisor before your next purchase.

If you're buying with a VA loan in Fort Worth, Frisco, Plano, or anywhere across North Texas, getting the funding fee calculation right before you're under contract can save you thousands. I work with VA buyers across the DFW market and can walk you through your rate, exemption status, and whether it makes sense to put money down. Connect with me at greysq.com/contact to talk through your situation before you start making offers.

Frequently Asked Questions

Can the VA funding fee be financed into the loan?

Yes. The VA allows borrowers to roll the funding fee into the loan balance rather than paying it at closing. This increases the total amount you're borrowing and the interest you'll pay over the loan term, but it reduces what you need to bring to the closing table. Veterans who are exempt pay nothing either way.

Does putting money down reduce the VA funding fee?

Yes. Putting 5% or more down lowers the fee to 1.50% for both first and subsequent use. At 10% or more down, the fee drops to 1.25%. On a $500,000 purchase, the difference between zero down at the first-use rate (2.15%) and 10% down (1.25%) is a $4,500 reduction in the funding fee alone, on top of a smaller loan balance.

Can I get a refund on the VA funding fee I already paid?

Yes, in certain circumstances. If you paid the funding fee at closing and later received a VA disability rating with an effective date on or before your loan closing date, you're entitled to a full refund. Contact your mortgage servicer with your VA rating decision letter showing the effective date to start the process.

Is the VA funding fee tax deductible in 2026?

The VA funding fee may be deductible as mortgage interest under IRS guidance that took effect for tax year 2026. Because this is a newer change, verify your situation with a tax professional before filing. The deduction isn't automatic and depends on your overall tax picture.

How do I find a real estate agent in Dallas-Fort Worth who works with VA buyers?

Look for an agent with direct experience closing VA transactions in Texas, not just general buyer representation. VA purchases come with specific requirements around appraisals, minimum property conditions, and seller concession limits. Ask any agent you're considering how many VA closings they've handled in the last 12 months and whether they've worked through the COE verification process with a lender before. That question will tell you quickly whether they know the difference.

If you're a veteran buying in DFW and want to work through how the funding fee applies to your specific situation (a first use, a pending disability claim, sorting out your entitlement, or just making sure the numbers on your Loan Estimate are right), reach out at greysq.com/contact. I work with VA buyers across Fort Worth, Frisco, Plano, McKinney, and the northern suburbs.

The funding fee isn't the most expensive part of buying a home in North Texas. But it's often the most unexpected. Knowing your rate, confirming your exemption status, and deciding whether to finance or pay at closing are all worth working through before you're under contract and looking at a Loan Estimate for the first time. If your situation involves a pending disability claim or prior VA loan use, those questions matter even more.

About Paul Blair Paul Blair is the founder and broker of Grey Square, a virtual real estate brokerage representing buyers and sellers across Dallas, Los Angeles, and Houston. With 22 years in the business, Paul works the full range of the market, from luxury homes in the Park Cities and Preston Hollow to estates in the Hollywood Hills and across the Westside. Connect with Paul and the Grey Square team at greysq.com. TX TREC #9011505 · CA DRE #01792671.