What is the VA Funding Fee?

If you’re new to the VA loan process, you’ve probably come across something called the VA Funding Fee. It’s a one-time charge that helps sustain the VA loan program for all veteran homebuyers. The fee usually ranges from about 2.15% to 3.3% of the loan amount, depending on factors such as:

• Whether you’re using your VA home loan benefit for the first time or a subsequent time
• The type of VA loan you’re getting (purchase, refinance, jumbo, etc.)
• Whether you plan to make a down payment

For example, on a $350,000 loan, a first-time funding fee of 2.15% amounts to $7,525. While this may sound substantial, the VA loan’s built-in advantages—no down payment, no private mortgage insurance (PMI), and competitive interest rates—often make it an excellent choice for veterans.

Why Does the VA Charge a Funding Fee?

Veterans commonly ask why there’s a fee at all. In short, the funding fee helps keep the entire VA loan program financially healthy. These funds allow the Department of Veterans Affairs to:

• Offer Zero Down Payments: Veterans can become homeowners with little to no money upfront.
• Eliminate Private Mortgage Insurance: VA loans save you the monthly PMI costs seen in many conventional mortgages.
• Maintain Entitlements: The fee supports the program so veterans can reuse or refinance in the future.

It’s essentially a self-funding mechanism that keeps this benefit going strong without placing a larger burden on taxpayers. However, disabled veterans are exempt—giving them a well-deserved financial break.

Why Disabled Vets Get the Exemption

By waiving the VA funding fee for disabled veterans, the VA acknowledges both your service and your sacrifice. This exemption:

• Cuts Upfront Costs: You’ll save thousands of dollars immediately at closing.
• Lowers Your Mortgage Payments: Rolling the fee into the loan can boost monthly costs, so avoiding it keeps your payment down.
• Promotes Financial Stability: Extra funds can go toward equity, household needs, or other essentials in your transition to civilian life.

It’s a powerful advantage that can significantly help disabled veterans achieve homeownership with fewer financial hurdles.

Who’s Eligible to Skip the Fee?

Not every veteran automatically qualifies for a funding fee exemption. According to VA guidelines, you’re exempt if:

1. You Have a Service-Connected Disability Rating of 10% or Higher You must provide a formal VA disability award letter as proof.
2. You Have a Pending Disability Claim If it’s approved after your loan closes, you can typically apply for a refund.
3. You Are an Active-Duty Service Member with a Purple Heart Recipients of the Purple Heart are often exempt immediately, even without a numeric disability rating.

How Do You Prove You’re Exempt?

To confirm your exemption, you need to provide a VA disability award letter showing your rating of at least 10%. For a Purple Heart recipient, proof of the medal is often enough.

If you’ve misplaced your award letter, you can request it via eBenefits or contact your VA regional office. If your claim is pending when you close on the property, you may need to pay the fee initially; once the VA finalizes your rating, you can apply for a full refund.

VA Funding Fee Rates

Loan Type	First Use	Subsequent Use	Exempt (Disabled)
Purchase ($350K)	2.15% ($7,525)	3.3% ($11,550)	$0
Cash-Out Refi ($350K)	2.15% ($7,525)	3.3% ($11,550)	$0
Jumbo ($600K)	2.15% ($12,900)	3.3% ($19,800)	$0

How the Exemption Changes Your VA Loan Game

Waiving the VA funding fee can change your homebuying experience in several ways:

• Immediate Savings: For a $350,000 loan, skipping the 2.15% fee saves you $7,525 right away.
• Lower Monthly Payments: If that $7,525 were rolled into your mortgage, it would raise your monthly costs by $20–$60 or more.
• More Homebuying Power: You could use the cash saved for closing costs, home improvements, or even qualify for a slightly higher-priced property.

What If You Paid the Fee Already?

Some veterans buy or refinance before their disability rating is finalized. In that case, you can usually apply for a funding fee refund:

1. Obtain Your Official Rating: Wait until you receive the VA’s final determination (10% or higher).
2. Submit VA Form 26-8986: Or follow any updated VA guidelines alongside your award letter.
3. Receive Your Refund: You’ll get back the fee you paid, either as a lump sum or a reduction in principal.

The timeline can range from a few weeks to a few months, depending on how quickly the VA processes your claim.

Exemption Savings by Loan Size

Loan Amount	Standard Fee (2.15%)	Exempt Savings	Monthly Impact
$300,000	$6,450	$6,450	$25 less
$400,000	$8,600	$8,600	$35 less
$600,000	$12,900	$12,900	$50 less

How to Lock in Your Exemption

Claiming this exemption involves a few clear steps:

• Check Your Disability Rating: Confirm it’s at least 10%. Keep an eye on pending claims.
• Gather Your Documents: DD-214, VA Disability Award Letter, Purple Heart documentation (if applicable).
• Choose a VA-Savvy Lender: Look for a financial institution experienced with VA loans.
• Prove the Exemption: Submit your disability letter or Purple Heart records to remove the fee.
• Close on Your Home: Review your final papers to ensure the fee hasn’t been added.

Why This Matters

VA mortgage rates have hovered around 6% (or higher), and many markets see around a 5% increase in home values. If you’re using a VA loan with an exemption:

• You Save More: Rising home prices mean the absolute dollar amount of the 2.15%–3.3% fee is higher.
• No PMI Advantage: Conventional buyers often pay private mortgage insurance, but VA loan users avoid that extra monthly cost.
• Maximum Entitlement: With an entitlement limit near $806,000 (and even higher in some areas), avoiding the fee on a larger loan saves tens of thousands of dollars.

What Could Trip You Up?

Although the process is straightforward, watch out for:

• Lost Disability Letter: Replacing it can take a week or more.
• Pending Claims: You may need to pay the fee first and then get a refund.
• Paperwork Delays: Missing documents like a Purple Heart certificate can stall proof of exemption.

Preparation and early coordination with your lender can help avoid last-minute issues.

Real-Life Wins with the Exemption

Many veterans have capitalized on their exemption:

• $300K Purchase: 10% rating, saved $6,450 upfront.
• $600K Jumbo: 30% rating, waived a $12,900 fee—funds redirected to home furnishings.
• $350K Refi: Paid the fee initially, received a 20% rating later, and got a $7,525 refund.

These examples underscore the real financial benefits disabled veterans can gain.

What If You’re Not Sure About Your Rating?

If you currently have a 0% rating or suspect your condition warrants a higher rating:

• Request a Re-Evaluation: Start at VA.gov or your regional VA office.
• Organize Medical Evidence: Present any doctor reports or relevant service-related records.
• Be Patient: Ratings can take time, but an upgrade to 10% or higher could lead to a funding fee waiver or refund.

Why It’s Worth Digging Into

Not paying the funding fee means:

• Building Equity Faster: A lower principal balance translates into less interest over the life of the loan.
• Lower Monthly Costs: Less principal and interest means more financial breathing room.
• Reinvesting in Your Future: Use the saved funds for home upgrades, emergency savings, or other goals.

In 2025, approximately 43% of veterans may opt for VA loans. If you qualify as disabled, it’s a prime chance to leverage your hard-earned benefits.

FAQs

1. Are disabled veterans exempt from paying the VA funding fee?

Yes. Veterans with a service-connected disability rating of 10% or higher typically do not pay the funding fee, which can save you thousands.

2. What disability rating qualifies for the exemption?

A service-connected disability rating of 10% or higher. If you have a pending claim that’s approved later, you can request a refund.

3. How do I prove I’m exempt?

You must show your VA disability award letter or Purple Heart documentation to your lender so the fee is removed from your closing costs.

4. What if my disability rating is pending?

You may pay the fee initially. After the VA approves your rating, you can apply for a full refund by submitting VA Form 26-8986 with your award letter.

5. Does having a Purple Heart waive the fee?

Yes. Active-duty service members with a Purple Heart are exempt, even without a formal disability rating.

6. Can I get a refund if I paid the fee but later received a disability rating?

Absolutely. Once you have your final rating, submit the necessary paperwork to the VA and you’ll be reimbursed.

7. Does the exemption apply to jumbo VA loans?

Yes. The exemption applies to all VA loans, including larger “jumbo” loans, potentially saving tens of thousands of dollars.

8. What if I can’t find my disability letter before closing?

Contact the VA or use eBenefits to request a copy. If you can’t provide it in time, you’ll pay the fee at closing and can later seek a refund if your rating qualifies.

9. Does partial entitlement affect my fee exemption?

No. The exemption remains in effect regardless of whether you have full or partial entitlement, as long as you meet the disability or Purple Heart criteria.

10. Why does the VA funding fee exemption matter for veteran homebuyers?

It can save you thousands in upfront costs, lower your monthly payments, and help you build equity more quickly—hugely beneficial for disabled vets in a market with rising interest rates and housing prices.

Additional Resources

Official VA Home Loan Program

State Veteran Affairs Offices

Veteran Service Organizations