Funding Fee Exemption, Eligibility Proof, and COE Documentation
Purple Heart Recipients and VA Loan Funding Fee Exemption: Complete Guide
VA.gov — Funding Fee and Closing Costs
VA Pamphlet 26-7
Blue Water Navy Vietnam Veterans Act (H.R. 299)
Purple Heart recipients who are on active duty at the time of closing are exempt from the VA funding fee. This exemption was codified by the Blue Water Navy Vietnam Veterans Act in 2019 and saves active-duty Purple Heart recipients thousands of dollars at closing. Veterans who received a Purple Heart but have separated from service qualify through the standard disability exemption if they have a service-connected disability rating.
Next step:
Check Your VA Loan Eligibility
Who Qualifies
- Active-duty Purple Heart: Service members on active duty who have received a Purple Heart are exempt from the VA funding fee at closing regardless of disability rating.
- Veteran Purple Heart: Veterans who received a Purple Heart and have separated from service qualify for exemption only if they also have a service-connected disability rating.
- No rating required (active): Active-duty Purple Heart recipients do not need a disability rating to be exempt — the Purple Heart award itself triggers the exemption.
- All loan types: The exemption applies to purchase, IRRRL, cash-out refinance, and construction loans — every VA loan type that normally carries a funding fee.
Dollar Impact
- First-use purchase: On a $400,000 loan with no down payment, the 2.15% funding fee waived saves the borrower $8,600 at closing or in financed costs.
- Subsequent use: A repeat borrower avoids the 3.30% fee — saving $13,200 on the same $400,000 loan, the largest single fee savings available on a VA loan.
- IRRRL refinance: The 0.50% fee is waived, saving $2,000 on a $400,000 refinance — smaller but still meaningful on a streamline with minimal closing costs.
- Lifetime benefit: The exemption applies to every VA loan the recipient uses, not just the first — the savings compound across multiple home purchases over a career.
Documentation Required
- DD-214 annotation: The Purple Heart must be documented on your DD-214 or equivalent separation document showing the award was earned during qualifying service.
- COE notation: Your Certificate of Eligibility must reflect the Purple Heart exemption — if it does not, request an update through the VA before closing.
- Active-duty verification: Active-duty members must provide orders or a statement of service confirming current active-duty status at the time of loan closing.
- Award orders: If the DD-214 does not list the Purple Heart, original award orders or a corrected DD-214 may be needed to establish eligibility.
Common Issues
- COE not updated: The most common problem is a COE that does not reflect the Purple Heart exemption, resulting in the funding fee being charged at closing incorrectly.
- Veteran vs active distinction: Veterans who have separated must have a disability rating to qualify — the Purple Heart alone is not sufficient after separation from service.
- Refund available: If you paid the funding fee and were eligible for exemption, you can request a refund from the VA through the Regional Loan Center.
- Timing matters: The exemption applies based on status at closing — if you separate between application and closing, verify your exemption basis with your lender.
Frequently Asked Questions
Do all Purple Heart recipients get the VA funding fee waived?
Only active-duty Purple Heart recipients get the fee waived based solely on the Purple Heart award. Veterans who have separated must also have a service-connected disability rating to qualify for the exemption. The Purple Heart alone does not trigger the exemption after separation.
How much does the Purple Heart funding fee exemption save?
On a $350,000 first-use purchase with no down payment, the exemption saves $7,525 (2.15% of the loan amount). On a subsequent-use purchase, it saves $11,550 (3.30%). The savings increase proportionally with loan size and apply to every VA loan the recipient uses.
Can I get a refund if I already paid the funding fee as a Purple Heart recipient?
Yes. Contact the VA Regional Loan Center at 877-827-3702 to request a funding fee refund. You will need to provide documentation of your Purple Heart award and evidence that you were on active duty at the time of closing or had a disability rating. The refund process typically takes 4 to 8 weeks.
The Bottom Line Up Front
If you received a Purple Heart and are still on active duty, you pay zero VA funding fee. Period. No disability rating needed, no extra paperwork beyond proving the award and your active-duty status. If you received a Purple Heart but have since separated from service, you need a service-connected disability rating to get the exemption — the Purple Heart alone is not enough after separation. The exemption saves $7,500 to $13,000 or more per loan depending on loan size and use history.
The biggest operational risk is a COE that does not reflect the exemption. If your Certificate of Eligibility does not show the Purple Heart notation or disability exemption status, you will be charged the funding fee at closing and have to request a refund afterward. Verify your COE before closing, not after.
The Blue Water Navy Vietnam Veterans Act
The Purple Heart funding fee exemption was established by the Blue Water Navy Vietnam Veterans Act, signed into law on June 25, 2019. Section 3 of the act specifically added active-duty Purple Heart recipients to the list of veterans exempt from the VA funding fee.
Before this law, Purple Heart recipients on active duty were required to pay the full funding fee unless they had a separate disability rating. The act recognized that Purple Heart recipients have already made a significant sacrifice and should not face an additional financial barrier when using their VA home loan benefit.
The exemption applies retroactively to loans closed on or after the law's effective date. If you closed a VA loan after June 25, 2019 and paid the funding fee while on active duty with a Purple Heart, you are eligible for a refund.
Active-Duty vs Veteran Purple Heart Recipients
The distinction between active-duty and veteran status is the most important factor in determining how the exemption works for Purple Heart recipients.
| Status | Purple Heart Alone Sufficient? | Disability Rating Required? | Exemption Basis |
|---|---|---|---|
| Active duty at closing | Yes | No | Purple Heart award + active-duty status |
| Separated/veteran | No | Yes | Service-connected disability rating |
| Transitioning (separating between application and closing) | Depends on closing date | If separated before closing, yes | Status at time of closing determines eligibility |
This distinction catches many veterans off guard. A Purple Heart recipient who separates from service and closes on a VA loan the following month needs a disability rating on file to avoid the funding fee. The Purple Heart award by itself only provides the exemption while on active duty.
Approval Watchpoint
If you are transitioning out of the military and planning to buy a home, time your closing carefully. Closing while still on active duty preserves the Purple Heart exemption without needing a disability rating. If you wait until after separation, you need a rated disability claim processed and reflected on your COE before closing. VA disability claims can take months, so start the process early.
How to Prove Your Purple Heart for the Exemption
Your lender needs documentation proving the Purple Heart award and, if active duty, your current service status. The standard documentation package includes:
- DD-214 with the Purple Heart listed in the decorations, medals, and awards section — this is the primary documentation for separated veterans.
- Purple Heart award orders or citation — the original orders from your commanding officer documenting when and why the award was given.
- Statement of service or active-duty orders — for active-duty members, confirming current military status at the time of loan closing.
- Corrected DD-214 (DD-215) — if the Purple Heart was omitted from your original DD-214, request a correction through the National Personnel Records Center.
Getting Your COE Updated
The Certificate of Eligibility is the document your lender uses to verify your VA loan benefit and any exemptions. If your COE does not show the Purple Heart exemption or disability exemption, the lender will charge the funding fee at closing.
To update your COE, contact the VA Regional Loan Center at 877-827-3702 or submit documentation through your lender's COE request process. Provide your Purple Heart documentation and proof of active-duty status. The VA will update the COE to reflect the exemption, and your lender can pull the updated version electronically.
Do this before closing. Fixing the COE after closing requires a refund request, which adds weeks to the process and means you pay the fee upfront and wait for reimbursement.
Requesting a Funding Fee Refund
If you paid the VA funding fee and were eligible for the Purple Heart exemption at the time of closing, you can request a refund. The process runs through the VA Regional Loan Center.
Contact 877-827-3702 and provide your Purple Heart documentation, proof of active-duty status at closing (if applicable), your VA loan number, and the closing disclosure showing the fee paid. The VA will review your eligibility and issue a refund, typically within 4 to 8 weeks.
For loans closed after June 25, 2019, the refund applies to the full funding fee amount. There is no time limit on requesting the refund, but earlier is better — the longer you wait, the more documentation you may need to reconstruct.
If you financed the funding fee into your loan, the refund reduces your principal balance. Your servicer will apply the refund to the outstanding balance, and your payment may decrease slightly as a result. Ask your servicer to recalculate your monthly payment after the refund is applied.
Purple Heart Exemption and Multiple VA Loans
The funding fee exemption applies to every VA loan a Purple Heart recipient uses — not just the first. If you purchase a home, sell it, and purchase another using your VA benefit, the exemption applies to the second purchase as well. The same is true for refinances. Every time you close a VA loan, the exemption eliminates the funding fee if you qualify.
This makes the lifetime value of the exemption substantial. A veteran who uses their VA benefit three times over a 20-year period on loans averaging $400,000 saves approximately $28,000 to $35,000 in total funding fees. That money either stays in your pocket at closing or reduces your loan balance by the same amount.
Other Funding Fee Exemptions
The Purple Heart exemption is one of several categories that qualify veterans for a funding fee waiver. Understanding the full list ensures you do not pay a fee you do not owe.
- Veterans receiving VA disability compensation for a service-connected disability at any rating level from 10% to 100% are exempt from the funding fee.
- Veterans entitled to receive disability compensation but receiving retirement pay or active-duty pay instead are exempt under the same provision.
- Surviving spouses receiving Dependency and Indemnity Compensation are exempt from the funding fee on all VA loan types.
- Active-duty service members with a proposed or memorandum disability rating indicating entitlement to compensation from a pre-discharge claim are exempt.
- Active-duty Purple Heart recipients are exempt regardless of disability rating under the Blue Water Navy Vietnam Veterans Act of 2019.
The Bottom Line
The Purple Heart funding fee exemption is straightforward: active duty at closing means zero fee with no disability rating needed. Separated means you need a disability rating. The exemption saves thousands per loan and applies to every VA loan you use for the rest of your life. Verify your COE reflects the exemption before closing, not after. If you already paid the fee and were eligible, request a refund through the VA Regional Loan Center.
The biggest mistake veterans make with this exemption is not knowing it exists or assuming it applies automatically after separation. Check your COE, confirm your status, and bring the documentation to your lender early in the process.
Next step:
Check Your VA Loan Eligibility
Frequently Asked Questions
Does the Purple Heart exemption apply to IRRRL refinances?
Yes. The exemption applies to all VA loan types including IRRRLs, cash-out refinances, purchase loans, and construction loans. The 0.50% IRRRL fee is waived for eligible Purple Heart recipients just like the larger purchase and cash-out fees.
Can my spouse use the Purple Heart exemption if I am not on the loan?
No. The exemption is tied to the veteran borrower. If the veteran is not on the loan, the exemption does not apply. If the veteran is a co-borrower, the exemption applies to the entire loan regardless of who else is on it.
What if my Purple Heart is not listed on my DD-214?
Request a DD-215 (correction to DD-214) through the National Personnel Records Center. Provide your Purple Heart award orders or citation as supporting evidence. The correction process typically takes 2 to 4 months. In the meantime, your original award orders may be accepted by some lenders as interim documentation.
Is the exemption automatic or do I have to request it?
It is not automatic. Your COE must reflect the exemption, which requires the VA to have your Purple Heart documentation on file. If your COE does not show the exemption, contact the VA Regional Loan Center or have your lender request an updated COE with the supporting documentation.
Does the Purple Heart exemption apply if I received it in a non-combat role?
The Purple Heart is awarded for wounds received in combat, so it inherently implies a combat-related injury. As long as the award is documented on your DD-214 or through official award orders, the exemption applies regardless of the specific circumstances. There is no additional combat verification requirement beyond the award itself.
How long does the funding fee refund take?
Typically 4 to 8 weeks from the date the VA receives your complete documentation. If the fee was financed into the loan, the refund is applied to your principal balance by your servicer. If the fee was paid in cash at closing, the refund is issued directly to you. Contact the VA Regional Loan Center at 877-827-3702 to initiate the process.
