Veteran reviewing iQRATE Mortgages VA loan documents.

Why Your Killeen & San Antonio VA Loan Fee is Higher

Q: What is the primary difference between a first-use and a subsequent-use VA funding fee?

A lender's seasoning period is a mandatory waiting time after you purchase or refinance a property before you can access the full after-repair value (ARV) for a cash-out refinance. Most DSCR lenders require a seasoning period of 6 to 12 months. Refinancing before the seasoning period concludes typically means the lender will base the loan amount on your original purchase price plus rehab costs, which severely limits the amount of equity you can cash out. Waiting until after the period allows you to borrow against the full market value you created through your renovations.

Q: How does my down payment amount impact the subsequent-use funding fee?

To justify a higher appraised value, you should provide the appraiser with a detailed and organized renovation packet. This packet removes guesswork and provides concrete evidence of the work performed. It should include: a cover letter summarizing the major upgrades, a detailed scope of work document itemizing all improvements, compelling before-and-after photos showing the property's transformation, copies of paid invoices and receipts for materials and labor, and copies of any official building permits that were issued for the work.

Q: Can I finance the VA funding fee into my mortgage?

No, LTV limits for cash-out refinances vary significantly among different DSCR lenders, as each has its own guidelines and risk tolerance. While purchase loans may reach 80% LTV, cash-out refinances are often capped at 70% or 75% LTV. The specific LTV offered to an investor is influenced by several factors, including: Credit Score (higher scores typically qualify for higher LTVs), DSCR Ratio (a stronger income-to-debt ratio may result in a better LTV offer), Property Type (a single-family home might receive a higher LTV than a multi-unit property), and Loan Amount (some lenders may offer different terms based on the size of the loan).

Q: Which veterans are exempt from paying the VA funding fee?

Your property's monthly rental income is the foundation of a DSCR loan approval. The formula is: DSCR = Gross Rental Income / Total Monthly Housing Payment. A higher rent results in a higher DSCR. This proves to the lender that the property can comfortably support a larger loan payment, which in turn allows you to qualify for a larger loan amount and maximize your cash-out.

Q: Does the percentage of my disability rating affect my funding fee exemption?

Yes, it is often possible to pay for closing costs with the proceeds from your new loan, meaning you don't need to bring cash to closing. However, these costs are not added on top of your loan limit. Instead, the closing costs are subtracted from the total cash-out funds available to you after your existing mortgage is paid off. The total loan amount, including these costs, cannot exceed the lender's maximum LTV limit based on the property's appraised value.

Q: Could a conventional loan ever be a better option than a subsequent-use VA loan?

Investors can make several avoidable errors that reduce their available cash-out funds. The most common mistakes include: Poor Documentation (failing to provide an appraiser with a thorough renovation packet can lead to a conservative and lower valuation), Refinancing Too Soon (not waiting for the lender's seasoning period to expire is a costly mistake that forces the loan to be based on cost rather than value), Lacking a Tenant (attempting to refinance a vacant property is less favorable, as lenders prefer the security of a signed lease over estimated market rents), and Ignoring Lender Differences (accepting the first loan offer without comparing options can mean missing out on better LTV limits or shorter seasoning requirements from other lenders).

Q: How can I get my Certificate of Eligibility or COE for a subsequent loan?

The ideal time to begin the refinance process is 30 to 45 days before your lender's seasoning period expires. This allows you to gather all necessary documentation, secure an appraisal, and complete underwriting so that you can close immediately once the seasoning requirement is met. Crucially, by this time, the property should also be 'stabilized,' which means you have a qualified tenant in place with a signed lease and have collected at least the first month's rent.

May 27, 2026

Specialized In Jumbo Loans, Investor Loans, DSCR Loans, Non-QM Financing, Commercial Mortgages, and Tax-Informed Lending Strategies

Published By

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Owner / Broker / Banker

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TL;DR

The VA funding fee increases for veterans using their home loan benefit more than once without a down payment.
Specific exemptions, like receiving VA disability compensation, can completely waive this subsequent use funding fee.
You can finance this fee into your total loan amount, but it will increase your monthly mortgage payment.

What is the difference between first use and subsequent use funding fees?

The Veteran Affairs (VA) funding fee is a one-time payment made to the Department of Veterans Affairs. This fee helps to cover losses on any loans that may go into default, which is how the VA can guarantee a portion of the loan without requiring monthly mortgage insurance. The key difference lies in the percentage charged based on your history with the benefit.

First-time use refers to the very first time you utilize your VA home loan benefit. The associated fees are lower as an incentive for veterans to become homeowners.

Subsequent use applies to any VA loan you take out after the first one. The VA charges a higher percentage for subsequent uses, primarily because the risk profile is perceived differently. However, making a down payment can significantly reduce this fee.

Here’s a direct comparison of the rates for purchases and construction loans for Veterans, active-duty service members, and National Guard/Reserve members:

Less than 5% down: The first-time use fee is 2.3% and the subsequent use fee is 3.6%.
5% to 9.9% down: The fee is 1.65% for both first-time and subsequent use.
10% or more down: The fee is 1.4% for both first-time and subsequent use.

(The data, information, or policy mentioned here may vary over time.)

As you can see, the most significant jump occurs when making little to no down payment on a subsequent loan.

How do I calculate the funding fee for my second VA loan in Killeen?

Calculating the funding fee is straightforward once you know the loan amount and the correct percentage. Let's walk through a realistic example for a homebuyer in Killeen, Texas.

Scenario: You are a veteran purchasing your second home using a VA loan. The home's sales price is $320,000, and you are making zero down payment.

Veteran calculating the VA funding fee for a second home loan.

Identify the Loan Amount: Since you are putting no money down, your base loan amount is $320,000.
Determine the Funding Fee Rate: As this is a subsequent use loan with less than a 5% down payment, your funding fee rate is 3.6%.
Calculate the Fee: Multiply the loan amount by the funding fee percentage.
- $320,000 (Loan Amount) * 0.036 (3.6% Fee) = $11,520

This means your VA funding fee is $11,520. This amount is typically added to your total mortgage balance, which we will discuss next.

Can the Veteran Affairs funding fee be financed into the loan amount?

Yes, one of the most significant advantages of the VA loan program is the ability to finance the funding fee. Instead of paying this cost out-of-pocket at closing, it can be rolled into your total loan balance.

Using our Killeen example:

Base Loan Amount: $320,000
Funding Fee: $11,520
Total Loan Amount: $320,000 + $11,520 = $331,520

Pros of Financing:

Reduces Upfront Costs: You don't need thousands of extra dollars in cash to close on your home.
Increases Accessibility: Makes homeownership possible for veterans who haven't saved a large sum for closing costs.

Cons of Financing:

Larger Loan Balance: Your total mortgage debt is higher from day one.
Increased Monthly Payment: A larger loan balance results in a slightly higher monthly principal and interest payment.
More Interest Paid Over Time: You will pay interest on the financed funding fee for the life of the loan.

Are there exemptions that waive the fee for subsequent use in San Antonio?

Absolutely. The VA provides several key exemptions that completely waive the funding fee for both first-time and subsequent use. If you are a veteran buying a home in San Antonio and meet any of the following criteria, you will not have to pay the fee.

A home with a 'Sold' sign, representing a successful VA home purchase.

You may be exempt from the VA funding fee if you are:

A veteran receiving VA compensation for a service-connected disability.
A veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active-duty pay.
A surviving spouse of a veteran who died in service or from a service-connected disability.
An active-duty service member who has been awarded the Purple Heart.

It is critical to confirm your exemption status before your loan closes. Your lender can help you verify this through your Certificate of Eligibility (COE).

Does my disability rating affect my subsequent use funding fee?

This is a common point of confusion. The specific percentage of your disability rating does not change the funding fee—it simply determines whether you are exempt or not.

A veteran with a 10% disability rating who receives VA disability compensation and a veteran with a 100% rating are treated the same regarding the funding fee: both are fully exempt. The requirement is not based on the severity of the disability but on the fact that you are entitled to receive compensation for a service-connected condition.

If your disability claim is pending when you close on your loan, you may have to pay the fee. However, if the VA later awards disability compensation retroactively to a date before your closing, you may be able to receive a refund for the funding fee you paid.

Is a conventional loan ever cheaper than VA loans with a high fee?

In certain specific scenarios, a conventional loan might be a more cost-effective option, even for an eligible veteran. The decision hinges primarily on your down payment amount and credit score.

Consider a veteran with an excellent credit score planning to make a 20% down payment.

VA Loan Scenario: With 20% down, the subsequent use funding fee is 1.4%. On a $400,000 home, that's a $5,600 fee added to the loan. There is no monthly mortgage insurance.
Conventional Loan Scenario: With 20% down, there is no Private Mortgage Insurance (PMI) required. There is no equivalent funding fee.

In this case, the conventional loan would be cheaper by avoiding the $5,600 funding fee. However, for the vast majority of veterans, especially those putting down less than 20%, the VA loan is superior. The cost of PMI on a conventional loan with a low down payment will almost always exceed the one-time cost of the VA funding fee over the first several years of the loan.

How does my down payment amount change the funding fee percentage?

Your down payment is the most direct way to control the cost of a subsequent use funding fee. The VA rewards borrowers who contribute their own funds at closing by reducing the fee percentage. The thresholds are set at 5% and 10% of the home's purchase price.

Here is the breakdown again for subsequent use:

0% to 4.99% Down: The funding fee is 3.6%.
5% to 9.99% Down: The funding fee is reduced to 1.65%.
10% or More Down: The funding fee is reduced further to 1.4%.

For a veteran buying a $350,000 home in San Antonio, putting down 5% ($17,500) instead of 0% would reduce the funding fee from $12,600 (3.6%) to $5,775 (1.65%), a savings of over $6,800.

Where do I find my Certificate of Eligibility for subsequent use?

Your Certificate of Eligibility (COE) is the official document that proves to the lender that you qualify for the VA home loan benefit based on your service. For subsequent use, you will need a new COE. There are three primary ways to obtain it:

Through Your Lender: This is the fastest and easiest method. Most VA-approved lenders have access to the VA's online system and can get your COE for you in minutes.
Online via the eBenefits Portal: You can log in to your eBenefits account on the VA's website and follow the instructions to request your COE.
By Mail: You can complete VA Form 26-1880, Request for a Certificate of Eligibility, and mail it to the address listed on the form. This is the slowest method and can take several weeks.

Your COE will indicate whether this is for 'first-time' or 'subsequent' use and, importantly, whether you are exempt from the funding fee. If you're a veteran in Texas considering another home purchase, understanding your funding fee is the first step. To get a precise calculation for your situation and explore all your VA loan options in Killeen or San Antonio, connect with a mortgage expert who specializes in veteran financing.

If you're ready to see how these numbers apply to your home purchase in Texas, you can start the process with confidence. Take the next step and apply for a mortgage to get a clear picture of your options.

Author Bio

David Ghazaryan is the expert mortgage strategist and founder behind iQRATE Mortgages. With a mission to fund home loans that traditional banks won't touch, David specializes in helping clients with unique financial situations, including those recovering from foreclosure or bankruptcy. He expertly crafts smart, strategic, and stress-free mortgages by leveraging a vast network of over 100 lenders to secure competitive rates for investors and homebuyers alike. Praised for exceptional customer service, David has helped hundreds of families with a 97% satisfaction rate, guiding them to the mortgage they deserve.