Who is Exempt From the VA Loan Funding Fee?
The Department of Veterans Affairs offers VA home loans to qualified veterans and their families—that’s common knowledge. What’s not so well known is how the government can afford to pay for this program. The VA loan program is paid for in part by the VA funding fee borrowers pay in addition to closing costs and other expenses related to buying a home.
Like many other aspects of buying a home, there’s no one-size-fits-all VA funding fee amount. The amount of the fee varies depending on a number of factors including how much (if any) down payment is made on the VA mortgage, and the military status of the applicant.
The VA doesn’t charge funding fees in all cases. There is a list of VA-approved circumstances that make the VA loan applicant exempt from having to pay this fee, which can be as much as 2.15% of the total loan amount in some cases. Who is exempt from paying the VA loans funding fee? According to the VA:
* Veterans who receive VA compensation for service‐related disabilities are exempt from the VA funding fee
* Veterans who are rated by VA as eligible to receive compensation as a result of pre-discharge disability examination and rating.Veterans who would receive compensation for service‐related disabilities if they did not receive retirement pay are also exempt
* Surviving spouses of military members who died on duty or who died or from service‐related disabilities as determined by the Department of Veterans Affairs are exempt
The existence of these situations that exempt the borrower from paying the VA funding fee aren’t’ enough. The VA requires the following documentation and paperwork:
* A VA Form 26-8937, Verification of VA Benefits, indicating the borrower’s exempt status
* For veterans who choose retirement pay instead of VA compensation, a copy of the original VA notification of disability rating
* Documentation of the veteran’s service retirement income
For surviving spouses, the VA requires a Certificate of Eligibility that shows the borrower is entitled as an unmarried surviving spouse.