VA Loan Questions: VA Funding Fee Exemptions for Disabled Veterans
A reader asks, “I was told when I separated from the US Air Force that I was eligible for a VA funding fee refund because I am a 90% disabled vet. Is that true and if so where do I start to get the refund?”
The answer to this particular question depends on where the veteran is with two processes–house hunting and the VA disability claims process. For borrowers who are looking for a home, it’s important to discuss VA funding fee exemptions with the lender.
The borrower who already has VA recognition of his or her service-connected disabilities must furnish VA Form 26-8937, Verification of VA Benefits, indicating the borrower’s exempt status. If this verification is not available prior to closing the loan, the borrower is required to pay the VA loan funding fee and apply for a refund once VA Form 26-8937 is available. Ask your lender where to send this form.
The reason for this is simple–the VA loan program does not automatically grant exemptions to the VA loan funding fee–borrowers must be recognized by the VA as an eligible veteran with service connected disabilities. VA loan rules say any veteran currently receiving VA compensation or who is eligible to receive VA compensation for service connected conditions–as recognized by the Department of Veterans Affairs–is eligible for the VA loan funding fee exemption.
For those who can submit VA Form 26-8937 prior to paying the fee, the exemption applies. For those who cannot, the refund of the VA loan funding fee is NOT automatic; it must be applied for. Discuss this situation with your lender in detail during the application process and/or once you’ve received official notification from the VA of your exempt status. You can also call the Department of Veterans Affairs at 1-800 827-1000.