If you receive VA disability compensation, the answer is no. You pay zero funding fee on a VA loan. That exemption is one of the most valuable pieces of the VA home loan program, and plenty of veterans either do not know about it or find out too late that they paid a fee they never owed.
What the Funding Fee Actually Is
The VA funding fee is a one-time charge on VA-backed loans. It keeps the program running without taxpayer money since VA loans require no down payment and no monthly mortgage insurance. For veterans who do pay it, the fee is a percentage of the loan amount. As an example, a first-time VA buyer borrowing $400,000 could see a 2.15% fee, which works out to $8,600. That fee can be rolled into the loan, so many buyers never feel it as cash out of pocket. But it is still real money added to the balance.
If you are exempt, that entire line item drops to zero.
Who Is Exempt
According to the VA, you do not pay the funding fee if any of these describe you:
Veterans receiving VA compensation for a service-connected disability. This is the most common exemption. Generally, a rating of 10% or higher comes with compensation and qualifies. A 0% service-connected rating acknowledges the condition but carries no compensation, so it does not qualify on its own.
Veterans eligible for compensation but receiving military retirement or active-duty pay instead. The entitlement is what matters, not which check you cash.
Surviving spouses receiving Dependency and Indemnity Compensation (DIC).
Service members with a proposed or memorandum disability rating dated before the loan closing. Pre-discharge claims count if the rating paperwork predates closing day.
Active-duty members who received a Purple Heart on or before the closing date. This exemption applies regardless of disability rating percentage.
The Refund Veterans Miss
Here is the part that costs people thousands. Say you bought your home while your disability claim was still pending. You paid the funding fee at closing because your exemption was not on record yet. Months later, the VA grants your rating with an effective date that reaches back to before your closing date.
In that case, you are eligible for a full refund of the funding fee. Not a partial refund. The whole amount.
The key is the effective date. It has to be retroactive to on or before your loan closing date. If you filed the claim after you closed, or the rating's effective date starts after closing, that particular loan's fee is not refundable. The good news: you will be exempt on every VA loan after that.
This applies to refinances too. Every VA purchase and every VA refinance carries its own funding fee, so audit each transaction, not just your first one.
How to Check and Claim It
Pull your closing disclosure and look for the VA funding fee line. Then compare two dates: your loan closing date and the effective date on your VA benefit summary letter. If the effective date is on or before closing and you paid the fee, you likely have a refund case.
Start with your lender or loan servicer, then contact the VA Regional Loan Center and tell them you are requesting a funding fee refund. Processing typically takes a few weeks once submitted. The refund comes back to you, or if you still hold the loan, it can be applied as a principal reduction.
Before your next VA loan, confirm your exemption shows on your Certificate of Eligibility. The funding fee line should read zero before you sign anything.
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Frequently Asked Questions
Do disabled veterans have to pay the VA funding fee?
No. Veterans receiving VA compensation for a service-connected disability are fully exempt from the VA funding fee on purchase loans, construction loans, and refinances. The exemption should appear on your Certificate of Eligibility before closing.
What disability rating exempts you from the VA funding fee?
Generally, a rating of 10% or higher qualifies because it comes with VA compensation. A 0% service-connected rating does not include compensation, so it does not qualify for the exemption on its own.
Can I get a refund of the VA funding fee if my disability rating comes after closing?
Yes, if your disability claim was pending before closing and the VA grants it with an effective date retroactive to on or before your closing date. Contact your lender or servicer first, then the VA Regional Loan Center, to request the refund. If the rating's effective date starts after closing, that loan's fee is not refundable, but you will be exempt on future VA loans.
Are Purple Heart recipients exempt from the VA funding fee?
Yes. Active-duty service members who received a Purple Heart on or before the loan closing date are exempt, regardless of disability rating percentage. Surviving spouses receiving DIC are also exempt.
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