One of the few costs associated with a VA loan is the VA funding fee. While VA loans don't require a down payment or private mortgage insurance, the funding fee helps offset the cost of the VA loan program to taxpayers. Understanding how the funding fee works can help you budget for your Hawaii home purchase.
What Is the VA Funding Fee?
The VA funding fee is a one-time fee paid to the Department of Veterans Affairs. It can be paid upfront at closing or rolled into your loan amount. The fee varies based on your military service category, down payment amount, and whether this is your first VA loan use or a subsequent use.
2026 VA Funding Fee Rates
For first-time VA loan use with zero down payment, the funding fee is 2.15% of the loan amount. For subsequent use with zero down, it increases to 3.3%. If you put 5% or more down, the fee drops to 1.5%, and with 10% or more down, it's just 1.25%.
For a $700,000 home in Mililani with zero down payment on first use, the funding fee would be approximately $15,050. On a $850,000 home, it would be approximately $18,275.
Who Is Exempt from the VA Funding Fee?
Several groups are exempt from paying the funding fee, including veterans receiving VA disability compensation, veterans who would be entitled to disability compensation but receive retirement pay instead, surviving spouses of veterans who died in service or from service-connected disabilities, and active-duty service members who provide evidence of receiving Purple Heart awards.
If you qualify for an exemption, this saves you thousands of dollars on your Hawaii home purchase.
Should You Pay Upfront or Finance the Fee?
Most VA buyers in Hawaii choose to roll the funding fee into their loan amount rather than paying it upfront. While this slightly increases your monthly payment, it preserves your cash for moving expenses, home improvements, and emergency savings — which is especially important in Hawaii's high cost-of-living environment.
Example: On a $700,000 Mililani home, financing the $15,050 funding fee adds approximately $95 to your monthly payment at a 6.5% interest rate.
How to Reduce Your VA Funding Fee
Make a down payment: Even a small down payment reduces the funding fee percentage significantly.
Check your disability status: If you have a pending disability claim, wait until it's approved before closing if possible.
Ask about exemptions: Your lender should verify your exemption status with the VA before closing.
The Bottom Line
The VA funding fee is a small price to pay for the incredible benefits of a VA loan, especially in Hawaii where the zero down payment and no PMI features save buyers tens of thousands of dollars. Don't let the funding fee discourage you from using your VA benefit.
The Kristy & Austin Home Group works with VA-specialized lenders who can calculate your exact funding fee and help you decide whether to pay upfront or finance it. Contact us at (808) 829-6819 or info@kahomegroup.com.
