The VA Funding Fee Exemption: VA Form 26-8937
In our last blog post, we discussed the VA home loan funding fee. VA loan applicants must pay this fee as part of the cost of getting a VA home loan, but some borrowers are exempt. Those exempt include anyone currently or formerly receiving VA disability benefits or eligible to do so. Surviving spouses of some veterans are also eligible if they meet the right requirements.
But exemption from the VA loan funding fee, which is 2.15% of the total loan amount for no-money-down VA mortgages, is not automatic. VA guidelines require “A properly completed and signed VA Form 26-8937, Verification of VA Benefit-Related Indebtedness, indicating the borrower’s exempt status” according to the Department of Veterans Affairs.
VA Form 26-8937 can be electronically completed and submitted by the lender, but requires personal data and a signature from the veteran. The borrower must certify they are or are not in debt to the government, are or are not receiving benefits at the time of application, and whether or not the applicant is currently in active service.
Once the form is completed the lender can submit VA Form 26-8937, Verification of VA Benefits, to the VA office where the loan application and/or closed loan package will be sent. The Department of Veterans Affairs reviews and returns the form to the lender.
The Department of Veterans Affairs advises borrowers and lenders to act quickly on this paperwork as it can take some time to review and approve. According to the VA, “If you submit the VA Form 26-8937 when the loan is originated, you will easily receive the response in time for closing. Do not wait until the last minute.”
It’s important to point out that the VA has different rules for any veteran who “receives nonservice-connected pension or has been rated incompetent by VA,” according to the VA Lender’s Guidebook. In these cases the loan cannot be closed automatically and must be submitted to the VA for review and prior approval. This is true even when the lender has “automatic authority” to process VA loans otherwise.
About Joe Wallace
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association.