The VA Funding Fee is charged by the Department of Veterans Affairs to keep the VA loan program running for future military homeowners. The fee goes directly to the VA loan program, not the lender.
The first use funding fee is 2.3% on the amount borrowed with your VA home loan. The fee changes to 3.6% on any future VA purchases or Cash-Out refinances. VA Streamline refinances, also known as IRRRLs (Interest Rate Reduction Refinance Loans), carry a reduced funding fee of 0.5%.
Veterans receiving compensation for a service-connected disability, surviving spouses and select others are exempt from paying the VA Funding Fee.
The VA Funding Fee calculator will help you get an idea of where you stand.