If you have a service-connected disability rating of 10% or higher, you do not pay the VA funding fee. On a 350,000 dollar purchase with no down payment, that exemption saves you 7,525 dollars in one transaction. Many veterans pay the fee anyway because their lender did not confirm exemption status before closing. Here is who qualifies and exactly how to make sure the fee is waived.
Who Is Exempt from the VA Funding Fee
The exemption applies to four groups. First, veterans receiving VA disability compensation for a service-connected disability. Second, veterans eligible for VA compensation but receiving military retirement or active duty pay instead. Third, surviving spouses of veterans who died in service or from a service-connected disability. Fourth, servicemembers with a proposed or memorandum rating for a pre-discharge claim. The claim does not have to be finalized to qualify for the exemption. Source: U.S. Department of Veterans Affairs, benefits.va.gov.
- You receive VA disability compensation for a service-connected disability
- You are eligible for VA disability compensation but receive military retirement or active duty pay instead
- You are a surviving spouse of a veteran who died in service or from a service-connected disability
- You have a proposed or memorandum rating for a pre-discharge disability claim
How to Make Sure the Fee Is Waived
The exemption is not automatic in the sense that lenders check for it without documentation. You need to provide your VA award letter showing the disability rating to your loan officer at the start of the process, not at closing. The Certificate of Eligibility shows your entitlement but may not reflect current disability status. Pull your VA award letter from your eBenefits portal or va.gov before you start the application. Give it to your loan officer on day one.
What the Fee Costs If You Are Not Exempt
For a first-time VA purchase loan with no down payment, the funding fee is 2.15% of the loan amount. For subsequent use, it rises to 3.30%. The fee can be financed into the loan so no cash is due at closing, but it increases both the loan balance and the monthly payment. On a 350,000 dollar loan, financing a 2.15% fee adds 7,525 dollars to the balance and roughly 40 to 45 dollars to the monthly payment.
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Confirm your funding fee exemption status before you start your VA purchase or refinance.
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