VA Funding Fee Exemptions
Not every veteran pays the VA funding fee. The Department of Veterans Affairs waives it entirely for several groups, and the exemption is documented rather than requested.
Quick answer
On at least one VA program we offer, the exempt groups are veterans receiving VA compensation for service-connected disabilities, veterans entitled to that compensation but receiving retirement pay or serving on active duty instead, and those rated eligible through a pre-discharge disability exam. Surviving spouses receiving Dependency and Indemnity Compensation before closing are exempt, as are active-duty members who show a Purple Heart award on or before closing. The spouse of an exempt veteran who has died is not automatically exempt unless receiving that compensation.
Who the VA says does not pay
These are the categories the Department of Veterans Affairs publishes.
- Veterans already drawing VA pay for service-connected disabilities
- Service members on active duty awarded the Purple Heart, shown by closing
- Surviving spouses whose DIC payments begin before the loan closes
- Service members with a proposed or memorandum rating showing pre-discharge disability eligibility
- Active-duty service members who provided evidence of a Purple Heart before loan closing
- A refund may apply if compensation is later awarded with an effective date before closing
The fee is waived entirely, not reduced
Exemption is read from your Certificate of Eligibility
Surviving spouses receiving DIC are included
Purple Heart recipients on active duty qualify
A later disability award can trigger a refund
Non-exempt borrowers can finance the fee
What The Funding Fee Is
A one-time payment, and one that many veterans never make.
VA describes the funding fee as a one-time payment that the veteran, service member, or survivor pays on a VA-backed or VA direct home loan. VA explains that it exists to reduce the cost to taxpayers, because the program does not require down payments or monthly mortgage insurance.
The exemption is not something you apply for separately. It is tied to your status and is read from your Certificate of Eligibility, which is why pulling the COE early matters. If your record is out of date, the fee can be charged when it should not have been.
Timing decides refunds. VA states you may qualify for a refund if you are later awarded compensation for a service-connected disability with an effective date before your loan closed. A rating awarded with an effective date after closing does not produce a refund.
What to check before you close
Most funding fee problems are records problems. They are cheaper to fix before closing than after.
Pull Your COE Early
The Certificate of Eligibility is where your exemption status is read. Requesting it at the start of the process, rather than at the end, is the single best way to avoid being charged a fee you do not owe.
A Pending Claim Still Counts
VA lists service members with a proposed or memorandum rating showing pre-discharge disability eligibility. If a rating is in progress, say so early rather than assuming it does not apply yet.
Surviving Spouses Are Included
VA names surviving spouses receiving Dependency and Indemnity Compensation among those who do not pay the fee. This is frequently missed.
Purple Heart Has Its Own Path
VA lists active-duty service members who provided evidence of receiving a Purple Heart before loan closing. Note the timing: before closing, not after.
Retirement Pay Does Not Disqualify
Being eligible for compensation but receiving retirement or active-duty pay instead is its own listed category. Choosing the other pay does not remove the exemption.
Refunds Turn On The Effective Date
VA ties a refund to a compensation award whose effective date falls before your loan closed. The award date and the effective date are not the same thing, and only one of them matters here.
Hear From Homeowners Like You
Frequently Asked Questions
What veterans and surviving spouses ask us about the funding fee.
Six groups skip the VA funding fee: veterans paid service-connected disability compensation, veterans who would be paid it if not for retirement pay, veterans rated eligible after a pre-discharge exam, veterans entitled but unpaid because they are on active duty, qualifying surviving spouses, and Purple Heart recipients still serving on active duty*. Surviving spouses and Purple Heart recipients must have proof in place by closing.
Yes, the same exemption groups cover a VA IRRRL. No Certificate of Eligibility is needed on an IRRRL, but the file still needs evidence of the exemption, such as a screen print of the funding fee status pulled at the moment VA assigns the loan number*.
Your lender verifies the VA funding fee exemption against VA’s records, with one program taking a printout of the fee status screen from VA’s system as proof*. What you provide is the paperwork behind your category, such as orders showing a Purple Heart or proof that DIC payments have started.
A surviving spouse is exempt from the VA funding fee when the veteran’s death came in service or from a service-connected cause, and your Dependency and Indemnity Compensation (DIC) has started before the closing date. This applies whether or not you use entitlement of your own. Without DIC, the spouse of an exempt veteran is not automatically exempt at one program*.
A pending claim is not on the VA funding fee exemption list in the program guides we rely on. The list covers veterans already receiving compensation, those rated eligible through a pre-discharge exam and rating, and those entitled but not paid because of active duty*. If a rating arrives before closing, tell your loan officer so the fee status can be checked again.
The guidelines we work from do not describe a VA funding fee refund, so we treat the exemption as something to settle before closing. Bring your rating letter or DIC award early so your loan officer can confirm the status VA shows. If you already paid the fee, ask VA directly about a refund.
The VA funding fee exemption removes the fee completely. One program’s fee table shows nothing due for disabled veterans and for Purple Heart holders on active duty, on first use and on later use alike*. For everyone else, the fee varies with the down payment and with whether you have used the benefit before.
No monthly mortgage insurance is added to a VA loan; the funding fee is VA’s charge, and it is collected once. When a VA cash-out pays off an FHA or conventional loan, VA counts the elimination of monthly mortgage insurance, public or private, as a net tangible benefit*.
Find out what you qualify for
Tell us about your service and any disability rating, current or pending, and we will confirm your funding fee status against your Certificate of Eligibility before anything gets to closing.
Get Pre-Qualified- Department of Veterans Affairs, VA funding fee and closing costs
- Department of Veterans Affairs, eligibility for VA home loan programs
Saxton Mortgage, LLC. NMLS #1717191. Equal Housing Lender. Licensed in 41 states. This is not a commitment to lend. All loans are subject to credit approval and underwriting. Funding fee exemption categories and refund eligibility are determined by the Department of Veterans Affairs and are subject to change.