Understanding VA Loan Costs
The VA funding fee is a one-time payment that helps sustain the VA home loan program for future generations of Nevada veterans and military families. Unlike conventional loans that require ongoing monthly mortgage insurance (PMI), this fee can be rolled into your loan amount—meaning you can still buy with $0 down and no out-of-pocket costs. Understanding how this fee works, who's exempt, and how to minimize it can save you thousands on your Nevada home purchase.
| Loan Type | Down Payment | First-Time Use | Subsequent Use |
|---|---|---|---|
| Purchase or Construction | Less than 5% | 2.15% | 3.30% |
| Purchase or Construction | 5% - 9.99% | 1.50% | 1.50% |
| Purchase or Construction | 10% or more | 1.25% | 1.25% |
| Cash-Out Refinance | N/A | 2.15% | 3.30% |
| IRRRL (Streamline Refi) | N/A | 0.50% | 0.50% |
| Assumption | N/A | 0.50% | 0.50% |
Example calculation
On a $400,000 Nevada home purchase with $0 down (first-time use), the funding fee would be $8,600 (2.15%). However, this can be rolled into your loan amount, so you don't pay it out of pocket.
Unlike PMI on conventional loans that costs $200-300/month, the VA funding fee is paid once and can be financed into your loan amount.
The fee is calculated as a percentage of your loan amount. On a $400K Nevada home, the typical fee ranges from $5,000-$8,600 depending on your down payment.
You can roll the funding fee into your mortgage, so you don't need to bring extra money to the closing table. It's paid over the life of your loan.
Making a down payment of 5% or 10% significantly reduces the funding fee rate, though most Nevada veterans prefer $0 down to preserve cash.
Since the funding fee is rolled into your mortgage, the interest you pay on it is part of your mortgage interest deduction for Nevada tax purposes.
You can use your VA loan benefit multiple times. While the subsequent use fee is higher, IRRRL refinances always have a low 0.50% fee.
The VA funding fee exists to keep the program self-sustaining without relying on taxpayer money. For most Nevada veterans, the benefit of $0 down and no monthly mortgage insurance far outweighs the one-time fee, especially since it can be financed into the loan. If you're exempt due to disability, you get all the benefits with no funding fee at all.
While many Nevada veterans happily pay the funding fee to access $0 down financing, there are several ways to reduce or eliminate this cost if it makes sense for your situation.
Putting down just 5% drops the fee from 2.15% to 1.50%, saving you $2,600 on a $400K loan. A 10% down payment reduces it to 1.25%, saving $3,600. If you have savings and want to minimize the fee, this is the most direct approach.
If you have any service-connected conditions, apply for VA disability compensation before closing. Even a 0% rating can sometimes qualify you for exemption. Nevada veterans with 10% or higher disability ratings are automatically exempt from the fee.
In Nevada's competitive market, sellers can contribute up to 4% toward your closing costs, which can cover the funding fee. Your real estate agent can negotiate this as part of your offer, especially in buyer-friendly market conditions.
If you're refinancing an existing VA loan, always use the IRRRL (VA Streamline Refi) instead of a cash-out refinance when possible. The IRRRL funding fee is only 0.50% compared to 2.15%-3.30% for cash-out refis, saving you thousands.
Nevada veteran tip
Most Nevada veterans choose to finance the full funding fee and keep their cash for emergencies, furniture, or home improvements. With today's low VA loan rates, the monthly cost of financing the fee is typically only $40-50, which is far less than PMI on a conventional loan would cost.
Veterans receiving VA compensation for service-connected disabilities are exempt from the funding fee.
Surviving spouses of veterans who died in service or from service-connected disabilities are exempt.
Veterans awarded the Purple Heart are automatically exempt from paying the VA funding fee.
Important for Nevada veterans: If you're receiving disability compensation, make sure to provide documentation to your lender before closing. The exemption will be applied, and you'll save thousands on your Nevada home purchase.
Veterans who apply for disability compensation after closing may be eligible for a refund of the funding fee. Contact the VA for details on the refund process.
When comparing mortgage options in Nevada, it's important to understand how the VA funding fee stacks up against costs on FHA and conventional loans.
On a $400,000 Nevada home purchase:
For Nevada veterans, the VA funding fee is clearly the most cost-effective option, saving tens of thousands over the life of the loan while requiring $0 down payment.