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VA Loan Funding Fee Exemptions: A Reader Question

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A reader asks, “I have purchased numerous homes using the VA Loan process – always paid the va funding fee. Today I signed Refi papers and was informed by a veteran that since I have a service connected disability I shouldn’t have to pay the VA funding fee.” “

“In looking at my document I received in July 1995 – The letter states – “Your disabilities listed below are service connected. However, since they are less than ten percent disabling, we cannot pay compensation for them” – my question is can I submit a claim for reimbursement for the VA funding fee.”

The key to understanding VA policy on VA loan funding fee exemptions is to know what qualifies the veteran for the exemption. In this particular case, the veteran’s service connected disability is only part of the picture–the other part is whether the veteran is considered eligible to receive VA compensation for those disabilities.

VA loan rules on this issue are found in VA Pamphlet 26-7. In Chapter Eight, we find the following:

“The following persons are exempt from paying the funding fee:

  • Veterans receiving compensation for service-connected disabilities
  • Veterans who would be entitled to receive compensation for service connected disabilities if they did not receive retirement pay”.

There are other examples–these are not the only two criteria, but in all cases where a veteran or currently serving military member is concerned, the common factor is being entitled to receive some kind of VA compensation.

According to what this reader has mentioned in the question, the fact that he or she is not entitled to receive compensation is the deciding factor. That said, this reader should contact the Department of Veterans Affairs to discuss the matter, just in case. It’s always best to get a second opinion from the source.

Do you have questions about VA home loans? Ask us in the comments section.

Bruce Reichstein

About Bruce Reichstein

Bruce Reichstein is an Expert on (VA) Military/Veteran Home Loan Guidelines for over 26 years. He is an experienced VA Loan Mortgage Banker who is passionate about assisting US Military Veterans utilize their Veteran Eligibility to purchase a home.

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