VA Funding Fee Exemptions

VA Funding Fee Exemptions are among the most powerful and little-used loopholes for those eligible for a VA home loan.

Whether buying a home or refinancing your mortgage, understanding if you qualify for these exemptions can save you a significant amount of money. Let’s get started!

What is the VA Funding Fee?

The VA funding fee is typically required on VA home loans. This fee helps to fund the VA loan program, ensuring that it remains available for future veterans. However, there are several exemptions to this fee.

If you fall into one of these exempted categories, you won’t need to pay this fee, which can be a huge financial relief.

Who is Exempt from the VA Funding Fee?

1. Active Duty Purple Heart Recipients

If you’re currently serving and have been awarded the Purple Heart, you are exempt from the funding fee. This recognition of your valor not only honors your bravery but also offers a tangible benefit when it comes to your home financing.

2. Veterans Receiving Compensation for Service-Connected Disabilities

Veterans who have sustained injuries during service and are compensated by the VA are exempt from the funding fee. This ensures that those who have sacrificed their health and well-being for their country receive financial relief.

3. Veterans Eligible for Compensation but Receiving Retirement Pay

Even if you choose retirement pay over disability compensation, your exemption still applies. This means you don’t have to worry about the funding fee eating into your retirement benefits.

4. Veterans with Pre-Discharge Disability Status

If you’re evaluated and rated as eligible to receive compensation based on pre-discharge examinations, you’re exempt. This ensures that those transitioning out of active duty with disabilities are not burdened with extra fees.

5. Active Duty Veterans Awaiting Disability Compensation

Veterans who will receive disability benefits but are currently on active duty are also exempt. This provision supports those who are in the process of transitioning from active duty to veteran status.

6. Surviving Spouses

If you’re the surviving spouse of a service member who died in service or from a service-connected disability, you may be exempt from the funding fee. This exemption helps to provide financial stability during a difficult time.

How to Apply for the Exemptions

Applying for a VA funding fee exemption is relatively straightforward. Here are the steps you need to follow:

1. Check Your Eligibility: Confirm that you fall into one of the exempt categories listed above.
2. Gather Documentation: Collect all necessary documents, such as proof of disability compensation, retirement pay statements, or Purple Heart award documentation.
3. Submit Your Application: When applying for a VA loan, submit your exemption documentation along with your loan application. Your lender will help you through this process.
4. Follow Up: Ensure that your exemption has been applied correctly by following up with your lender.

Benefits of VA Loan Funding Fee Exemptions

• Financial Savings: Exemptions can save you thousands of dollars in upfront costs.
• Reduced Monthly Payments: Lower loan amounts can lead to reduced monthly payments.
• Increased Buying Power: With lower costs, you may be able to afford a higher-priced home.
• Peace of Mind: Knowing you have earned this benefit through your service can provide a sense of relief and security.

Frequently Asked Questions

Q: What is the VA funding fee rate for non-exempt veterans?

A: The VA funding fee varies based on the type of loan and your down payment amount. For first-time use with no down payment, it is typically 2.3% of the loan amount.

Q: Can I get a refund if my exemption status changes?

A: Yes, if your exemption status changes after your loan has closed, you may be eligible for a refund of the funding fee.

Q: Are there any other fees associated with VA loans?

A: While the funding fee is a significant cost, VA loans generally have lower closing costs compared to conventional loans. However, it’s important to review all fees with your lender.

Conclusion

Understanding and leveraging VA loan funding fee exemptions can provide substantial financial benefits to veterans and active duty service members.

By knowing your eligibility and applying for these exemptions, you can save money and enjoy a smoother home buying or refinancing process.  Let’s explore your options today!