Veterans and active duty service members researching the New Orleans VA funding fee usually have one question first: how much will it add to a VA One-Time Close construction loan, and is there any way around it. The short answer is that most borrowers pay it, a meaningful share of veterans are fully exempt, and the fee works differently on a construction loan than it does on a simple home purchase because the fee touches both the construction phase and the permanent mortgage.
This guide breaks down the New Orleans VA funding fee for 2026, who qualifies for an exemption, and what else New Orleans veterans building a new home should plan for, including flood zone rules and VA minimum property requirements.
What Is the VA Funding Fee?
The VA funding fee is a one time charge paid to the Department of Veterans Affairs that helps keep the VA loan program funded for future veterans, since VA loans do not require monthly mortgage insurance. It is calculated as a percentage of the loan amount and can generally be rolled into the loan itself rather than paid out of pocket at closing.
The exact percentage depends on three things: whether this is your first use of VA loan entitlement or a subsequent use, your down payment amount, and whether you qualify for an exemption.
New Orleans VA Funding Fee Rates for 2026
For a VA One-Time Close construction loan with no down payment, first time VA loan use generally carries a funding fee around 2.15 percent of the loan amount. Subsequent use of VA entitlement with no down payment runs closer to 3.3 percent. Putting even 5 percent down brings the fee down meaningfully, and 10 percent or more down brings it to the lowest tier.
These percentages apply to VA purchase and construction loans alike, and current, exact rates should always be confirmed at the time of your loan application since VA fee schedules can be updated.
Who Is Exempt From the New Orleans VA Funding Fee
A significant number of veterans building in the New Orleans area pay no funding fee at all. You are generally exempt if any of the following apply:
- You receive VA disability compensation for a service-connected condition, at any rating percentage
- You are a surviving spouse eligible for VA loan benefits
- You received a Purple Heart
There is no minimum disability rating required for the exemption. Your Certificate of Eligibility, or COE, will reflect your exempt status once the VA has confirmed it, and your lender pulls that information directly from the VA rather than relying on paperwork you provide yourself.
How the Funding Fee Works With a VA One-Time Close Construction Loan
A VA One-Time Close construction loan combines the lot purchase, the construction draws paid to your builder, and the permanent 30 year VA mortgage into a single closing. Because it is still a VA-guaranteed loan, the funding fee applies the same way it would on a standard VA purchase, calculated against the total loan amount rather than being charged separately for the construction phase and the permanent phase.
This is one of the practical advantages of the one-time close structure. You are not paying a construction loan funding fee and then a second fee when the loan converts to permanent financing. You pay it once, it can be financed into the loan, and your rate is locked from the start of construction rather than floating until the home is finished.
Flood Zones, Elevation, and Insurance Costs New Orleans Veterans Should Plan For
Much of the New Orleans metro sits at or below sea level, and new construction is treated differently than existing homes when it comes to flood compliance. The city requires an elevation certificate for new construction, and homes generally need to be built at or above the base flood elevation for their zone. Expect the elevation certificate itself to run in the range of a few hundred to a few thousand dollars depending on the lot and the surveyor.
Flood insurance is close to unavoidable for new construction across most of Orleans, Jefferson, St. Tammany, St. Bernard, and St. Charles Parishes, and it is worth getting a firm insurance quote before you finalize your build budget rather than after. Your lender will factor projected flood and homeowners insurance into your qualifying payment, so knowing that number early helps avoid surprises during underwriting.
VA Minimum Property Requirements for New Construction
Before your VA One-Time Close loan can convert to permanent financing, the completed home has to meet VA minimum property requirements, or MPRs. In practice this means the home needs to be safe, sanitary, structurally sound, and fully complete on both the house itself and required site work like a permanent driveway and sitework grading. Your builder does not need a separate VA Builder ID to participate, though builders with prior VA construction experience typically move through underwriting more smoothly.
Certificate of Eligibility and Entitlement
Before pricing out your funding fee or your build budget, request your Certificate of Eligibility. Most veterans qualify with 90 consecutive days of active duty during wartime, 181 days during peacetime, or six years of qualifying National Guard or Reserve service. Your COE also shows your available entitlement, which determines how much you can build without a down payment.
Talk to a New Orleans VA Loan Advisor About Your Funding Fee
Every veteran’s funding fee situation is different depending on entitlement history, disability status, and down payment plans. If you are weighing a VA One-Time Close construction loan in the New Orleans area, it is worth reviewing your Certificate of Eligibility and funding fee scenario before you go under contract on a lot.
Learn more in our New Orleans VA One-Time Close Construction Loans guide, or see the VA’s own explanation of the fee at VA.gov funding fee and closing costs.
About the author: Charles, Mortgage Loan Advisor with Max Mortgage, LLC. 20+ years in mortgage and real estate. NAMB Certified FHA Mortgage Professional.
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