The Fee Halves at Five Percent Down, and in Kentucky That Buys You Something Extra
Program and regulatory figures verified October 10, 2026. Details change; confirm your scenario with us.
This is the one VA cost a borrower can actually move, and in a declining market the cheapest way to move it does a second job.
The rates
| Loan | Fee |
|---|---|
| First use, under 5% down | 2.15% |
| ★★ Subsequent use, under 5% down | ★★ 3.3% |
| Either use, 5% or more down | 1.5% |
| Either use, 10% or more down | 1.25% |
| Cash-out refinance | 2.15% first use, 3.3% after |
| IRRRL | 0.5% |
★★ The cliff, and the cheap way off it
Subsequent use under 5% down is 3.3%. Put 5% down and it is 1.5%: a cut of more than half for a five-percent deposit. Going on to 10% only reaches 1.25%, a much smaller gain for twice the cash.
★★★ Kentucky is where that threshold does double duty. Five percent of a $247,027 Elizabethtown house, or a $181,327 Murray one, is a reachable sum, and in a market where 13 of 20 metros fell, that same five percent is also the only equity cushion you will have. One deposit, two benefits. Why the cushion matters here.
★ That is the clearest "do this" on the whole site for a second-time VA buyer in Kentucky.
The five exemptions
- Receiving VA compensation for a service-connected disability.
- Eligible for that compensation but receiving retirement or active-duty pay instead.
- Receiving Dependency and Indemnity Compensation as a veteran's surviving spouse.
- ★★ A service member with a proposed or memorandum rating before the loan closing date.
- ★★ An active-duty member with evidence of a Purple Heart, on or before the closing date.
★★ Number 4 is a timing fact worth acting on: the VA's own list names a memorandum rating dated before closing, so a veteran mid-claim should find out where that paperwork sits before fixing a closing date. Number 5 is narrower than people assume, written for active duty, with evidence by closing.
★ Where one of these applies the fee is not reduced. It is not charged.
★★★ The Kentucky asymmetry, which is the point of this page
The fee exemption asks whether you receive compensation for a service-connected disability, at any compensable level. Kentucky's homestead exemption asks whether you are classified as totally disabled, or 65.
★★★ So in Kentucky the federal waiver is the wider benefit. A veteran with a 40% or 70% rating under 65 pays no funding fee and gets nothing from the Commonwealth. For a large share of Kentucky's veterans, this waiver is the single largest benefit they will actually receive on a home purchase. The three tests.
★★ The reverse holds too: a totally disabled veteran clears both, and should also check the no-annual-re-application rule. What that saves.
★ What we are not telling you
- Whether to finance the fee. That turns on a rate we do not publish.
- Any dollar figure, the fee is a percentage of the loan amount and we publish no loan or payment examples.
- Whether your rating or paperwork qualifies. That is the VA's call, not ours.
Mike Certo, NMLS #260555. (480) 296-6513 · mcerto@cfmtg.com.
Frequently asked questions
What is the VA funding fee in 2026?
On a purchase, 2.15 percent for first use with less than 5 percent down and 3.3 percent for subsequent use with less than 5 percent down, both dropping to 1.5 percent at 5 percent or more down and 1.25 percent at 10 percent or more. Cash-out refinancing is 2.15 percent first use and 3.3 percent after, and an IRRRL is 0.5 percent.Why does 5 percent down matter more in Kentucky?
It does two jobs. It cuts a subsequent-use funding fee from 3.3 percent to 1.5 percent, and in a state where thirteen of twenty metros fell over the year to August 2026 it is also the only equity cushion a VA borrower will have against a declining market.Do I need a final VA rating to be exempt from the funding fee?
No. The VA lists a service member who has received a proposed or memorandum rating before the loan closing date as an exempt category, so the final decision is not required if that paperwork predates closing.Is the funding fee waiver worth more than Kentucky's homestead exemption?
For many Kentucky veterans, yes. The waiver reaches any compensable service-connected rating, while Kentucky's homestead exemption requires classification as totally disabled or age sixty-five. A veteran rated below total and under sixty-five pays no funding fee and receives nothing from the Commonwealth.Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about VA home loan financing, not a loan commitment and not legal, tax or financial advice. Cornerstone First Mortgage is a private lender and is not affiliated with, endorsed by or acting on behalf of the U.S. Department of Veterans Affairs or any government agency. VA entitlement, funding-fee exemption and disability ratings are determined by the U.S. Department of Veterans Affairs. Kentucky's homestead exemption is established by section 170 of the Constitution of Kentucky and KRS 132.810 and is administered by county Property Valuation Administrators, not by Cornerstone; the amount is reset every two years by the Kentucky Department of Revenue and the tax effect depends on local rates. Housing market figures describe the twelve months to August 2026 and are not a forecast. Figures here carry the date we verified them against primary sources. All loans are subject to borrower, property and program qualification.