VA Loan Assumption Funding Fee: What Colorado Buyers Pay in 2026
When you assume a VA loan, you pay a funding fee of 0.5% of the loan balance, not the 1.25% to 3.3% you'd owe on a new VA purchase loan. On a $400,000 assumption, that's $2,000 out of pocket instead of $8,600 to $13,200. Disabled veterans with a service-connected disability rating of 10% or higher, and surviving spouses of veterans who died in service, pay nothing.
Here's what you need to know:
What Is the VA Funding Fee for an Assumption?
The VA charges a funding fee on every VA-backed loan to help keep the program running without requiring taxpayer appropriations. When a buyer assumes an existing VA loan, the VA still collects a fee from the new borrower, but the rate is far lower than what you'd pay on a new VA purchase loan.
For a VA loan assumption, the funding fee is 0.5% of the remaining loan balance. That fee applies regardless of whether the buyer is a veteran, active duty service member, or a civilian. The 0.5% rate does not change based on down payment or whether it's a first or subsequent use.
Contrast that with a new VA purchase loan:
| Loan Type | Down Payment | First-Time Use | Subsequent Use | |-----------|-------------|----------------|----------------| | New VA purchase loan | Less than 5% | 2.15% | 3.30% | | New VA purchase loan | 5% to 9.99% | 1.50% | 1.50% | | New VA purchase loan | 10% or more | 1.25% | 1.25% | | VA loan assumption | N/A | 0.50% | 0.50% |
The assumption funding fee is fixed and straightforward. With a new VA loan, the rate depends on your down payment size and whether you've used VA benefits before.
Real Dollar Comparison: Assumption vs New VA Loan
Here's what the funding fee difference looks like at three common Colorado price points:
$350,000 remaining balance
- Assumption funding fee: $1,750
- New VA loan (2.15%): $7,525
- Savings on funding fee alone: $5,775
$400,000 remaining balance
- Assumption funding fee: $2,000
- New VA loan (2.15%): $8,600
- Savings on funding fee alone: $6,600
$500,000 remaining balance
- Assumption funding fee: $2,500
- New VA loan (2.15%): $10,750
- Savings on funding fee alone: $8,250
These numbers only reflect the funding fee. The real win for most Colorado buyers comes from the interest rate. Assuming a $500,000 VA loan at 3.25% means a monthly payment of $2,176. A new VA loan on the same property at 6.80% puts your payment at $3,260. That is $1,084 less per month, every month, for the life of the loan. Use the payment calculator to run your specific numbers.
The funding fee savings are real and meaningful, but they are a one-time cost. The monthly payment difference is what compounds over 20 or 30 years.
Who Is Exempt from the VA Assumption Funding Fee?
Not everyone pays the 0.5% assumption fee. The VA exempts the following buyers from the funding fee:
- Veterans with a service-connected disability rating of 10% or higher. If you receive VA disability compensation, or if you are entitled to receive it but are currently receiving retirement pay instead, you are exempt.
- Surviving spouses of veterans who died in service or from a service-connected disability. Surviving spouses receiving Dependency and Indemnity Compensation (DIC) are exempt.
- Veterans rated for a pre-discharge disability exam. If your claim was pending at the time of loan closing and you later receive a rating, the VA will refund the funding fee.
Active duty service members who received the Purple Heart are also exempt on new VA loans. That exemption applies to assumptions as well.
If you are not sure whether you qualify for an exemption, request your Certificate of Eligibility (COE) through the VA. Disability ratings and exemption status are verified directly through the VA during the assumption process.
What Other Costs Should Colorado Buyers Expect?
The funding fee is one piece of the total cost picture for a VA loan assumption. Here is what else Colorado buyers typically pay:
Closing costs: Assumption transactions still involve title fees, escrow fees, lender processing fees, and potentially attorney fees. Budget 1% to 2% of the loan balance in total closing costs, including the funding fee. This is still well below the 2% to 5% typical on a new purchase loan.
The equity gap: This is often the largest cost in an assumption. The equity gap is the difference between the home's purchase price and the remaining loan balance. If a Colorado Springs home is listed at $520,000 and the VA loan balance is $380,000, the buyer needs to cover the $140,000 gap in cash, through a second loan, or via a combination of both.
Lender processing fee: Some servicers charge a flat processing fee for assumption applications, ranging from $300 to $900. This is separate from the VA funding fee and is set by the individual lender.
Appraisal: Appraisals are not required for VA loan assumptions the same way they are for new purchase loans, but some servicers request one anyway. Confirm with the servicer before budgeting.
For a detailed walkthrough of VA loan assumptions, including timelines and servicer-specific requirements, see the full guide.
The Fort Carson and Schriever Buyer Angle
Colorado Springs is one of the strongest VA assumption markets in the country because of the concentration of military installations: Fort Carson, Schriever Space Force Base, and Peterson Space Force Base collectively house tens of thousands of active duty service members and veterans.
Many of those buyers arrive on permanent change of station (PCS) orders with VA entitlement and a compressed timeline. For a PCS buyer, assuming an existing VA loan at 3% instead of originating a new loan at 6.80% can mean the difference between an affordable monthly payment and stretching thin.
The assumption funding fee for a PCS buyer who qualifies for an exemption due to a service-connected disability is zero. For those who pay it, $2,000 to $2,500 on a standard Colorado Springs price point is a rounding error compared to the monthly savings.
If you are a military buyer looking at Colorado Springs, start by browsing available assumable homes to see current inventory.
How the Funding Fee Gets Paid
The VA assumption funding fee is typically:
- Paid at closing as part of the buyer's closing costs, or
- Rolled into the loan balance if the servicer and lender permit it
Rolling the fee into the loan avoids an out-of-pocket payment at closing, but it adds to the loan principal and the amount of interest paid over time. On a 0.5% fee of $2,000, rolling it in adds roughly $10 to $12 per month to the payment for the remaining loan term at typical rates. Worth doing the math either way.
Step-by-Step: How to Check Your VA Funding Fee Status
- Pull your Certificate of Eligibility (COE) from the VA benefits portal or ask your lender to pull it on your behalf.
- Look for the disability exemption notation on the COE. If it says "EXEMPT," you owe no funding fee.
- If your disability claim is still pending, notify the lender in writing. You may owe the fee at closing but receive a refund after your rating is confirmed.
- If you are a surviving spouse receiving DIC, bring documentation to closing.
See the full VA loan assumption eligibility requirements guide for additional qualification details.
Frequently Asked Questions
Does the VA assumption funding fee apply to non-veterans?
Yes. Any buyer who assumes a VA loan pays the 0.5% assumption funding fee, regardless of military status. The exemptions (disability rating, surviving spouse status) only apply to buyers who have a qualifying VA relationship. A civilian buyer without a VA connection pays the full 0.5%.
Can I roll the VA assumption funding fee into the loan?
Sometimes. Whether you can roll the fee into the loan balance depends on the servicer's policies and whether rolling it in would push the loan balance above the original balance cap. Ask the servicer specifically about this during the assumption application process.
Does assuming a VA loan use my own VA entitlement?
Only if the buyer is a veteran and the parties agree to substitute entitlement. In most assumptions, the buyer simply takes over the loan without VA entitlement being involved on the buyer's side. The seller's entitlement remains tied to the property until the loan is paid off, unless a veteran buyer with sufficient entitlement substitutes their entitlement at closing to release the seller's.
How long does a VA loan assumption take in Colorado?
Most VA loan assumptions in Colorado close in 45 to 90 days, depending on the servicer's processing speed. Some servicers are faster (30-45 days); others routinely take 90 to 120 days. USAA, Navy Federal, and Veterans United tend to move faster on assumptions than some conventional servicers holding VA-backed paper.
What happens if I am denied for a VA loan assumption?
If the servicer denies your assumption application, the most common reasons are credit score, DTI ratio, or missing documentation. You typically can appeal or resubmit with a co-borrower. If the denial is final, you can explore a new VA purchase loan or a new FHA loan on a different property with an assumable mortgage.