The VA Funding Fee on New Construction
$9,675. That is the funding fee on a $450,000 VA construction loan with nothing down and first use of the benefit. If the number looks familiar, it should: it matches, to the dollar, the fee you would pay buying an existing home at the same price. The VA prices new construction at the purchase-loan rates, down payment tier for down payment tier. The rate is never the surprise. The surprise is the number it multiplies.
The VA funding fee on new construction runs at purchase rates
The VA's fee tables give new builds no column of their own. Construction sits in the same row as purchase, and the tiers read the same. First use, less than 5% down: 2.15%. Five to 9.9% down: 1.5%. Ten percent or more: 1.25%. Subsequent use, less than 5% down: 3.3%. The two higher tiers stay at 1.5% and 1.25% on repeat use.
| Down payment / equity | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% to 9.9% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
No construction discount, no construction surcharge. A set of blueprints prices exactly like a resale.
The loan amount does the real work
The VA charges the fee on the loan amount, not the price of the home. On a resale those are close cousins. On a build they can drift apart. Your loan amount usually wraps in the land purchase, the construction contract, and the soft costs the lender folds into the deal, minus whatever you put down. The percentage lands on that total.
Say the project pencils out to $450,000 and you put nothing down, first use. The fee comes to $9,675. The VA lets you finance the fee into the loan, which keeps your cash free for the build itself. Rolled in, the balance becomes $459,675. At 6.75% over 30 years, the financed fee adds about $62.75 a month. Across the life of the loan that works out to roughly $22,590 in payments for a $9,675 fee, or about $12,915 in interest. Paying cash costs exactly $9,675. The spread is real, though on a $450,000 project it rarely decides the deal. The full cash-versus-finance math is worth an hour of your time if the number above made you flinch.
Repeat users feel this the hardest. The same $450,000 build on subsequent use, nothing down, carries a 3.3% fee: $14,850. That is $5,175 more than the first-use fee for the same house, and it is why the down payment tier matters twice as much on a second VA loan. The breakdown is in our guide to funding fees on a second VA loan.
Land you already own can shrink the fee
Builders rarely mention this part. If you already own the lot free and clear, its appraised value generally counts as your equity in the project, and the fee tier follows the equity, not the cash you hand over at closing. Take a $90,000 lot and a $360,000 construction contract: $450,000 total, $360,000 borrowed, 20% equity. That puts you in the 10% or more tier, where the fee is 1.25% instead of 2.15%. The fee becomes $4,500 on the $360,000 loan, less than half the $9,675 from the zero-down example.
Run this by your lender before you sign anything, because the lot appraisal drives the whole calculation. The rule is standard, but the number on the appraisal is where these deals live or die.
Same exemptions, same check before closing
A construction loan does not change who skips the fee. Veterans receiving VA disability compensation are exempt. Veterans entitled to compensation but taking retirement or active-duty pay instead are exempt. So are surviving spouses receiving Dependency and Indemnity Compensation, and active-duty service members who provide Purple Heart evidence on or before the closing date.
Check the Certificate of Eligibility before the loan closes, the same as you would on a purchase. If a disability rating arrives after closing with an effective date before the loan date, the fee may come back to you. That refund path is its own topic, covered in our guide to VA funding fee refunds after a disability rating.
Get the fee in writing before you sign the builder contract
You are probably reading this because a builder quoted you a price and the lender quoted you a fee, and the two numbers did not quite match. Here is the fix. Get the lender's Loan Estimate with the fee line filled in before you commit to the builder. Construction loans move numbers around, draws and allowances and reserves. The fee should sit on its own line, calculated on the full loan amount, at the tier your equity actually supports. If the estimate shows 2.15% and your lot equity puts you at 1.25%, that is a conversation worth having before the builder's pen comes out. Run the number yourself first so you walk into that conversation with the right figure.
Frequently Asked Questions
Does the VA funding fee apply to new construction loans?
Yes. VA construction loans carry the same funding fee rates as purchase loans: 2.15% on first use and 3.3% on subsequent use with less than 5% down, 1.5% with 5% to 9.9% down, and 1.25% with 10% or more down. There is no separate construction rate.
Is the fee based on the land price or the whole build?
The whole loan amount. The VA applies the funding fee to the loan amount, not the price of the home, so on a build the fee is calculated on everything the loan covers: land, construction, and folded-in costs, minus your down payment or lot equity.
Can my builder pay the VA funding fee?
A builder can contribute toward your costs the same way a seller can, and those contributions count against the VA's 4% concession cap. On a $450,000 project the cap is $18,000, so a $9,675 fee fits with room to spare. Get it written into the contract, not agreed by handshake. The mechanics are the same as seller-paid funding fees.
Do disabled veterans pay the fee on a construction loan?
The exemptions do not change on a build. Veterans receiving VA disability compensation are exempt, as are veterans entitled to compensation but receiving retirement or active-duty pay instead, surviving spouses receiving Dependency and Indemnity Compensation, and qualifying Purple Heart recipients. Verify the exemption on your Certificate of Eligibility before closing.
What if I already own the land?
The lot's appraised value generally counts as your equity in the project, which can move you into a lower fee tier. A $90,000 lot on a $450,000 project is 20% equity, dropping a first-use fee from 2.15% to 1.25%. Confirm the treatment with your lender, since the appraisal controls the math.
Run Your Own Fee Numbers
Enter your loan amount, down payment, and use type to see your exact 2026 funding fee, then compare tiers before you talk to the builder.
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