VA Funding Fee Refund After Disability Award
VA funding fee rules
COE and eligibility
VA Regional Loan Centers
Request an updated COE
You can get a VA funding fee refund when a later disability award makes you exempt as of your closing date. The key is the effective date. If VA disability compensation is effective on or before the day you closed, the funding fee should not have been charged, and VA can refund it after you submit the proof.
Eligibility, effective date decides everything
- Retroactive effective date required: Your VA award must show an effective date on or before your loan closing date for refund eligibility.
- Pending claim at closing is common: If you paid the fee because your claim was pending and later the award is retroactive, you can qualify for the refund.
- Not all ratings qualify: If the award effective date is after closing, the fee was correctly charged and a refund usually does not apply.
- Updated COE is the proof: A refreshed COE showing exempt status is often the cleanest way to show the loan should have been fee free.
How to start the request
- Start with your servicer: Your current lender or servicer can often initiate the refund request through VA systems because they already have your loan file.
- VA Regional Loan Center works too: You can contact a VA Regional Loan Center and request guidance on the funding fee refund process for your loan.
- Be ready with dates: Have your closing date and your disability effective date handy, because those two dates determine eligibility.
- Ask for status tracking: Get confirmation of who submitted the request and what documents were uploaded so you can follow up without starting over.
Documents you should gather first
- Updated COE: Pull a new Certificate of Eligibility that reflects exempt status for the funding fee.
- Closing Disclosure: Provide the Closing Disclosure or settlement statement showing the funding fee amount and whether it was paid in cash or financed.
- VA award letter: The award decision needs to show the effective date that makes you exempt as of closing.
- Basic loan identifiers: Keep your loan number and property address available so the request can be matched to the correct guaranteed loan record.
How the refund is paid and what changes after
- Paid cash means cash back: If you paid the funding fee in cash at closing, the refund is typically issued back to you once approved.
- Financed fee means principal reduction: If you financed the fee, the refund is typically applied as a principal only payment. Your monthly payment usually stays the same, but your balance and total interest drop.
- Timelines vary: Initial review can be quick once documents are complete, but actual processing and issuance can still take weeks.
- Confirm your ledger: After the refund, verify how it posted. A financed fee refund should show as principal only, not escrow or a payment credit.
FAQs
When can I get a VA funding fee refund?
You can qualify when VA later awards disability compensation with an effective date on or before your closing date. That means you were exempt at closing, even if the exemption was not verified yet because a claim was pending.
If I financed the funding fee, will my payment go down after the refund?
What documents do I need for a funding fee refund request?
A VA funding fee refund is possible when you paid the fee at closing, then later receive VA disability compensation with an effective date that reaches back to before your closing date. The whole decision turns on one fact: the effective date of your VA compensation. If that date is earlier than your loan closing date, you may be eligible for a refund under VA’s published funding fee refund rules in the VA funding fee refunds guidance.
Who Qualifies for a VA Funding Fee Refund After Closing?
You qualify when your VA compensation for a service connected disability is awarded after closing, and the effective date is retroactive to before the day you closed. This often happens when a claim was pending at closing or when VA later assigns an earlier effective date. VA states the effective date must be retroactive to before closing, and it also states that a proposed or memorandum rating received after closing does not make you eligible for a refund under the VA funding fee refund eligibility section.
- Retroactive effective date: Your VA compensation effective date must be earlier than the loan closing date, not the date the decision letter was issued.
- Fee actually paid: A refund only applies if the funding fee was collected at closing, whether you paid it in cash or financed it into the loan.
- Proposed or memorandum timing: If that rating arrives after closing, VA says you are not eligible for a refund based on that rating.
Eligibility Quick Check
| Situation | Refund Likely? | Why | What to Do Next |
|---|---|---|---|
| Award letter arrives after closing, effective date is before closing | Yes | Effective date reaches back to before the funding fee was collected | Pull an updated COE and start a refund request |
| Award letter arrives after closing, effective date is after closing | Usually no | No retroactive coverage to the closing date | Confirm the effective date and ask VA if an earlier date applies |
| Proposed or memorandum rating is issued after closing | No | VA states it does not create refund eligibility when issued after closing | Only pursue a refund if a later final award has an earlier effective date |
| You were exempt at closing but were still charged | Yes | This is an exemption error scenario | Have the lender or servicer correct the record and request a refund |
- Find the loan closing date on your Closing Disclosure or settlement statement, then write it down as your reference point.
- Find the VA compensation effective date on the award letter, then compare that date to your closing date with no assumptions.
- If the effective date is earlier than closing, treat the refund as actionable and move to the documentation and request steps.
How Retroactive Disability Effective Dates Trigger a Refund
The legal logic is straightforward. If VA later awards disability compensation and makes it effective on or before the date the fee was collected, VA must refund the funding fee. VA’s Office of General Counsel addresses this directly in VAOPGCPREC 2 2019 on funding fee refunds for retroactive awards, which is the cleanest baseline for understanding why the effective date controls the outcome.
- Decision date is not the key: You can be granted after closing and still qualify, as long as the effective date reaches back before closing.
- Pending claim at closing is common: Many refunds start when a claim was unresolved at closing, then later granted with a retroactive effective date.
- Do not confuse rating types: Proposed or memorandum ratings have specific timing rules, so your document set must match your scenario.
How to Start the Refund Request
Your fastest path is usually through the lender or servicer, because they can initiate and track the correction in VA systems. VA instructs lenders and servicers to initiate corrections and refund requests through the VA Funding Fee Payment System, with documentation uploaded into WebLGY, as described in VBA Circular 26 23 19 on funding fee exemption and refund procedures. If you want to contact VA directly, VA publishes the Regional Loan Center contact line and hours in the VA home loan contact information sheet with Regional Loan Center phone and hours.
- Start with your servicer: Call your current mortgage servicer and ask for the department that handles VA loan guaranty and funding fee refund corrections.
- Escalate with precision: Tell them you need a funding fee refund review due to a retroactive VA compensation effective date earlier than closing.
- Use VA if needed: If you cannot get traction, call the VA Regional Loan Center line at 877 827 3702 during posted business hours.
What to Say on the Phone
- One sentence summary: I paid the VA funding fee at closing, and my VA award letter shows an effective date before my closing date.
- Ask for the action: Please initiate a funding fee refund request and tell me what documents you need to upload or email.
- Ask for tracking: What is the internal case number, and what is your expected review timeline once you have the full packet.
What Documents You Need for a Clean Request
The VA and your servicer cannot approve a refund without proof that you paid the fee and proof that your exemption applies retroactively. Build your packet before you call so you do not get stuck in a reset cycle. For the COE piece, VA explains the process on the VA instructions for requesting a Certificate of Eligibility, and an updated COE can help show exempt status once VA has updated your record.
- Updated COE: A current COE that reflects exempt status helps align the loan record with your exemption once VA updates the underlying data.
- Closing Disclosure or settlement statement: This proves the fee was collected and shows the funding fee amount tied to your loan closing.
- VA award letter: The letter must clearly show the compensation effective date so the reviewer can verify it is earlier than closing.
Document Packet Checklist
| Document | What It Proves | Where to Find It | Common Mistake |
|---|---|---|---|
| Updated COE showing exempt status | Exemption status in VA eligibility record | Lender pull through VA systems or VA COE request pathway | Submitting an old COE that still shows non exempt |
| Closing Disclosure or settlement statement | Funding fee was collected at closing and the amount | Your closing package from escrow, title, or lender | Sending only page one without the fee line item |
| VA award letter | Effective date of disability compensation | VA decision letter or VA portal download | Omitting the page that shows the effective date |
- Make sure names and loan number match across documents, because mismatches create manual review and delays.
- Highlight the effective date on the award letter and the closing date on the Closing Disclosure to reduce reviewer ambiguity.
- Keep a full PDF copy of what you submit, because you may need to resend the same packet to a different department.
How the Refund Is Delivered, Especially If You Financed the Fee
If you were charged the funding fee when an exemption applies, VA policy is that VA remits the refund directly to the borrower, and lenders are not required to reduce the principal balance of the loan. That is stated in VBA Circular 26 21 11 describing refunds remitted directly to the borrower. Practically, if your funding fee was financed, you should assume the refund will not automatically reduce your loan balance unless you or your servicer applies it that way.
Refund Routing Scenarios
| How You Paid the Fee | What VA Typically Does | What Happens to Your Monthly Payment | Best Next Step |
|---|---|---|---|
| Paid in cash at closing | Refund is remitted to the borrower | No change unless you change the loan later | Deposit it, then decide whether to save it or apply it to principal |
| Financed into the loan amount | Refund is remitted to the borrower | Payment usually stays the same unless your servicer offers a recast | Request a principal only payment application if your goal is balance reduction |
- Principal reduction is optional: If you financed the fee, applying the refund to principal can reduce balance and interest over time, but it will not automatically lower the payment.
- Ask about recast rules: Some servicers offer a payment recast after a large principal reduction, but it is not guaranteed and may require a fee.
- Keep the audit trail: If you apply the refund to principal, keep confirmation showing it posted as principal only, not as a future payment credit.
How Long Does a VA Funding Fee Refund Take?
Timelines vary, but VA system guidance provides a practical baseline. The VA Funding Fee Payment System FAQs state processing times for refunds to Veterans are approximately 7 to 10 business days, and the same guidance explains how lenders check refund status in the system in the VA Funding Fee Payment System refund processing FAQ. Missing documentation, mismatched borrower status, or unclear refund destination can extend timelines.
- Assume 7 to 10 business days only after the request is properly submitted and approved, not from the day you first call.
- If your lender says the refund is approved but you do not receive it after two weeks, ask them to recheck status and escalate through VA support channels.
- If you are still waiting, verify the refund destination was set correctly and that your supporting documents were uploaded to the loan record.
Common Problems That Delay or Prevent a Refund
Most failures happen because the file does not prove the effective date or does not prove the fee was collected. Keep situational awareness on those two facts, and you will avoid most dead ends. When you hit friction, force clarity by asking what specific document or date is blocking approval.
- Effective date mismatch: The award letter date is after closing and the effective date is also after closing, so the refund trigger is not met.
- Wrong rating type timing: A proposed or memorandum rating issued after closing is treated as not eligible for a refund based on that rating.
- COE not updated: Your disability award is granted but the COE still shows non exempt, so the lender cannot align the exemption in the system.
- Incomplete closing proof: The Closing Disclosure you submitted does not show the funding fee line, or it is missing pages and signatures.
- Request a current COE after the award posts, then resend it with the award letter and Closing Disclosure as a single packet.
- Ask the servicer to confirm they submitted the request through FFPS and that the refund destination and notes match your scenario.
- If you still get denied, ask for the exact denial reason in writing so you can correct the specific gap instead of guessing.
The Bottom Line
If your VA disability compensation effective date is earlier than your loan closing date, a funding fee refund is a realistic outcome, not a long shot. The fastest execution is a clean packet, updated COE, Closing Disclosure, and award letter with the effective date highlighted, followed by a servicer initiated request through VA systems. If the fee was financed, do not assume your payment will drop. Treat the refund as cash you control, then decide whether to apply it as principal only to reduce long term interest.
References Used
- VA Funding Fee and Funding Fee Refund Eligibility Rules
- VA Office of General Counsel Opinion on Funding Fee Refunds for Retroactive Awards
- VBA Circular 26 23 19, Funding Fee Exemption and Refund Procedures
- VBA Circular 26 21 11, Refunds Remitted Directly to the Borrower
- VA Funding Fee Payment System FAQ, Refund Processing and Status Checks
- VA Regional Loan Center Contact Information and Hours
- VA Steps to Request a Certificate of Eligibility
Frequently Asked Questions
What date decides whether I qualify for a funding fee refund?
The VA compensation effective date is the key. If your award is effective before your loan closing date, you may qualify. The decision letter date matters less than the effective date shown in the award notice.
If my disability claim was pending at closing, can I still get a refund later?
Yes, if the later award makes compensation effective before closing. That is the common refund scenario. You still need to prove the fee was collected at closing and provide the award letter showing the effective date.
Do proposed or memorandum ratings qualify me for a refund?
If a proposed or memorandum rating is issued after closing, VA states you are not eligible for a refund based on that rating. If you later receive a final award with an effective date before closing, reassess eligibility.
Should I contact my lender, my servicer, or VA first?
Start with your current servicer because they can initiate the correction and refund request through VA systems. If you cannot get traction, contact the VA Regional Loan Center line and provide your loan details and effective date facts.
What documents do I need to request the refund?
Bring an updated COE showing exempt status if available, your Closing Disclosure or settlement statement showing the funding fee amount, and your VA award letter with the compensation effective date. Highlight the key dates to prevent delays.
If I financed the funding fee, will my monthly payment go down after the refund?
Usually no. VA policy describes refunds remitted to the borrower, and lenders are not required to reduce the loan principal automatically. If you want balance reduction, ask your servicer to apply the refund as a principal only payment.
How long does the refund usually take once requested?
VA Funding Fee Payment System guidance indicates refunds to Veterans are often processed in about 7 to 10 business days once approved. Missing documents or incorrect refund setup can extend timelines, so keep copies and follow up with status checks.
Will the refund go to me or to the lender?
When a borrower was charged a funding fee despite an exemption, VA policy states the refund is remitted directly to the borrower. A refund can go to the lender only in cases where the lender paid a fee in error without charging the borrower.
My COE still shows non exempt after my award. What should I do?
Ask your lender to pull a fresh COE after the award posts and verify VA systems reflect your exemption status. If the COE does not update, contact VA for a status review and provide your award letter and identifying details.
What is the most common reason refunds get delayed?
The packet does not clearly prove the two controlling facts: the funding fee was collected at closing and the VA compensation effective date is earlier than closing. Submit the Closing Disclosure pages that show the fee and the award page that shows the effective date.
