Important Facts About VA Loan Funding Fee Exemption For Disabled Vets
The VA Loan Funding Fee is part of the cost of buying a home with a VA insured mortgage. Borrowers are required to pay this fee by law, unless identified as exempt by the Department of Veterans Affairs. The VA explains the funding fee as follows;
“The fee is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers”
“The funding fee for second time users who do not make a down payment is slightly higher. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment.”
As stated previously, 2.15% is the basic amount for an active duty service member buying a home with a VA mortgage with no money down. But if that buyer is a veteran receiving VA compensation for service-connected disabilities he or she is exempt from paying that 2.15%.
The same goes for vets who “would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay” according to the VA. Also exempt? “Surviving spouses of veterans who died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan).”
This exemption is a very important benefit–borrowers can save a substantial amount on the funding fee if they aren’t required to pay it, but those seeking to claim their exemption have an important detail to be mindful of as they prepare to commit to a VA home loan–the service-connected disabilities must be recognized by the Department of Veterans Affairs before exemption can be claimed.
That is not to say that a veteran currently under VA review for disability claims won’t get their exemption once the VA certifies the disability, but it does mean that the VA loan applicant may be required to pay the VA loan funding fee in the meantime and request a refund at a later date once VA certification is complete and on the record. Borrowers in this situation should let the lender know they are awaiting VA disability status and that they want to know what the procedures are for requesting a refund of the VA funding fee once disability status is approved.
Vets awaiting disability status should not hesitate to use their VA home loan benefits, but they should know that unless the VA has signed off on a disability claim the funding fee must still be paid. Borrowers who aren’t sure their claims will be approved by the Department of Veterans Affairs should contact their nearest VA office for advice on how to proceed.
About Bruce Reichstein
Bruce Reichstein is an Expert on (VA) Military/Veteran Home Loan Guidelines for over 26 years — www.VALoans.com. He is an experienced VA Loan Mortgage Banker who is passionate about assisting US Military Veterans utilize their Veteran Eligibility to purchase a home.