VA loan funding fee exemptions and disability compensation

Who may be exempt

VA lists several exemption categories. These include veterans receiving service-connected disability compensation; certain veterans eligible for compensation who receive retirement or active-duty pay instead; qualifying surviving spouses receiving DIC; certain service members with pre-discharge proposed or memorandum ratings; and active-duty Purple Heart recipients who provide the required evidence before closing.

Ask the lender to verify your exemption through the appropriate VA documentation. Eligibility should be established for the transaction rather than assumed from a conversation about your health.

How much can the fee be?

For a non-exempt VA-backed purchase loan, the fee depends on first or subsequent use and the down payment. VA’s published schedule lists 2.15% for first use with less than 5% down, and 3.3% for subsequent use with less than 5% down. Different amounts apply with larger down payments and for other loan types.

On a $300,000 loan, a 2.15% fee would be $6,450. That illustration excludes other closing costs and is not a loan quote.

A later disability award

A refund may be available if VA later awards disability compensation with an effective date retroactive to before the loan closing date. A proposed or memorandum rating received only after closing does not itself establish a refund under VA’s guidance.

If you believe you qualify, contact your lender or VA regional loan center and keep the closing documents and award letter available.

Read the full Loan Estimate

An exemption does not waive the interest rate, property taxes, insurance, appraisal, or every lender and settlement charge. Review the itemized Loan Estimate and Closing Disclosure. Ask questions about charges you do not understand before committing.