VA Loan Funding Fees–Who Is Exempt?
Changes to the VA loan funding fee structure as of November 22, 2011 have raised a great many questions. Borrowers naturally want to know about the status of any legislation that could potentially add or subtract thousands of dollars to the VA loan transaction.
But one area that’s equally important to discuss when reviewing VA loan funding fees is the list of those who are exempt from paying the VA loan funding fee. Do you know whether you’re eligible to have the VA funding fee waived? Who is qualified for an exemption?
According to VA Pamphlet 26-7, all veterans receiving VA compensation for service-connected disabilities are at the top of the “exempt” category. Following them, “…veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay.”
Another group of veterans that are exempt from the VA loan funding fee are, “Veterans who are rated by VA as eligible to receive compensation as a result of pre-discharge disability examination and rating,” and “Veterans entitled to receive compensation, but who are not presently in receipt because they are on active duty.”
One more important group exempt from the VA funding fee? Surviving spouses. “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).”
Getting exempt status is not automatic. The lender is required to verify the exempt status, so VA loan applicants must not assume that they don’t have to budget for the VA loan funding fee or are not required to pay until exempt status is recognized during the VA loan process.
Some borrowers must pay the VA funding fee and apply for a refund later–this usually happens when the borrower’s status cannot be verified in time but will be verified sometime after loan closing. We’ll discuss those issues in another blog post.