How VA Funding Fee Exemptions Save Veterans Thousands

The VA funding fee is a one-time charge on every VA loan that funds the program and keeps it running for future generations of veterans. While it serves an important purpose, the fee can be substantial — ranging from 1.25% to 3.3% of your loan amount. The good news? Many veterans are completely exempt from paying it, and claiming this exemption can save you thousands of dollars.

What Is the VA Funding Fee?

The VA funding fee is charged at closing and goes directly to the Department of Veterans Affairs. It's the VA's primary tool for maintaining the loan program without relying on taxpayer funding. The fee amount depends on several factors:

• First-time use with $0 down: 2.15% of loan amount
• Subsequent use with $0 down: 3.3% of loan amount
• 5% down payment: 1.5% (first use) or 1.5% (subsequent)
• 10%+ down payment: 1.25% (first use) or 1.25% (subsequent)

On a $400,000 loan with $0 down (first use), the funding fee is $8,600. That's significant money.

Who Is Exempt From the VA Funding Fee?

The following veterans and service members are completely exempt:

• Veterans with a service-connected disability rating of 10% or higher from the VA
• Veterans receiving VA disability compensation
• Veterans who would receive disability compensation but for receipt of retirement pay
• Surviving spouses of veterans who died in service or from service-connected disabilities
• Active-duty Purple Heart recipients

If you fall into any of these categories, you do not pay the funding fee. Period. This exemption applies every time you use your VA loan benefit.

How Much Does the Funding Fee Exemption Save Over Time?

Let's look at real numbers for a veteran buying a $400,000 home:

• First purchase: Save $8,600 (2.15% of $400,000)
• Second purchase: Save $13,200 (3.3% of $400,000)
• Two purchases over a lifetime: Save $21,800+ total

If the funding fee is rolled into the loan (as many veterans choose), you also save on the interest charged on that fee amount over 30 years. At 6.5% interest, that $8,600 fee generates an additional $11,000+ in interest. So the real savings on the first purchase alone is closer to $20,000.

How Do You Claim Your Funding Fee Exemption?

The process is straightforward:

• Already rated: If you have a current VA disability rating, your lender can verify your exemption electronically through the VA system. It should appear on your Certificate of Eligibility
• Pending rating: If you've filed a disability claim but haven't received your rating yet, you may still be exempt. If your claim is approved after closing, the VA will refund the funding fee
• Haven't filed yet: If you have service-connected conditions but haven't filed a claim, consider doing so before your home purchase. The funding fee savings alone make it worth the effort

Can the Funding Fee Be Refunded?

Yes. If you paid the funding fee and later receive a VA disability rating retroactive to before your closing date, you're entitled to a full refund. Your lender can initiate this refund through the VA. Keep documentation of your disability claim timeline to support the refund request.

What Should You Do Before Buying?

If you have any service-connected conditions, file your VA disability claim before you purchase a home. Even a 10% rating saves you the entire funding fee. Barrett Henry, MRP with REMAX Collective, advises every veteran client to check their disability status before starting the home-buying process. Call (813) 733-7907 to discuss your situation and learn more about VA funding fees.