Tim Popp
What is the VA funding fee, who pays it, and when can it be waived for disabled veterans?
🎯 Quick Answer
The AIs covered the mechanics well, but here's what I see in actual loan files: the funding fee waiver is one of the most under-communicated benefits in the VA program, and timing matters more than people realize.
↓ Below: full answers from ChatGPT, Claude, Gemini, plus Tim’s expert take.
Short answer: The VA funding fee is a one-time charge that helps fund the VA loan program; it is normally paid by the veteran borrower (or financed into the loan) but can be waived for veterans who receive VA disability compensation or for certain surviving spouses. Disabled veterans who are receiving VA disability compensation or are rated permanently and totally disabled are eligible to have the fee waived.
Key points – what the funding fee is
– A one-time fee collected on most VA-guaranteed home loans to support the program.
– It can be paid up front at closing or rolled into the loan balance.
Who pays it
– The borrower on the VA loan is responsible for the fee unless the seller agrees to pay closing costs or the fee is otherwise financed.
– Some co-borrower situations can affect responsibility; discuss specifics with your lender.
When it can be waived for disabled veterans
– The fee is waived if the veteran is receiving VA disability compensation for a service-connected disability or if the veteran has a VA determination of being permanently and totally disabled due to service.
– Surviving spouses receiving Dependency and Indemnity Compensation (DIC) may also be exempt.
– To get the waiver at closing, provide the lender the VA documentation showing entitlement to disability compensation or a VA letter indicating exempt status (for example, a benefits award letter or appropriate VA determination).
If you paid the fee and later become eligible
– You can apply for a refund by submitting documentation of your VA disability award to your lender and the VA; the VA will review and, if eligible, issue a refund of the fee already paid.
Talk with your lender or a VA loan specialist to confirm the documentation needed and the steps to get the waiver processed before closing.
The VA funding fee is a one-time cost that helps keep the VA loan program running without taxpayer funding. **The veteran/borrower pays this fee**, which typically gets rolled into the loan amount rather than paid out of pocket at closing.
**How much the fee costs depends on:**
– Your military service category (regular military, Reserves, National Guard)
– Down payment size (if any)
– Whether this is your first VA loan or a subsequent use
– Your disability rating from the VA
For first-time VA loan users with zero down payment, the fee generally runs 2.15%-2.40% of the loan amount. Making a down payment of 5% or more reduces the fee significantly. Subsequent uses of the VA loan benefit carry slightly higher fees.
**Funding Fee Waivers for Disabled Veterans:**
The fee is **completely waived** if you receive VA disability compensation, even at just 10% disability rating. You must have this rating documented before or at closing to receive the waiver.
Also waived for:
– Veterans eligible to receive disability compensation but receiving retirement or active duty pay instead
– Surviving spouses of veterans who died in service or from service-connected disabilities
**Important timing note:** If you close on your loan before your disability rating comes through, you typically cannot get a retroactive refund of the funding fee. Work with your lender to delay closing if your VA disability claim is pending and likely to be approved soon.
The waiver can save thousands of dollars on a typical loan. For example, on a $400,000 loan, avoiding the 2.15% fee saves $8,600 that would otherwise be added to your mortgage balance.
The VA funding fee is a one-time payment made to the Department of Veterans Affairs that helps lower the cost of the loan for U.S. taxpayers. The borrower pays this fee, which is a percentage of the loan amount, and it is typically financed into the total loan balance rather than paid out-of-pocket at closing.
The exact percentage of the fee varies based on several factors, including:
* **Your down payment amount:** A larger down payment can reduce the fee.
* **Type of service:** The fee differs slightly for regular military versus Reserves or National Guard.
* **Loan purpose:** The fee for a cash-out refinance is different from a purchase loan.
* **Prior VA loan use:** The fee is generally higher for veterans who have used their VA loan benefit before (known as subsequent use).
Certain veterans are exempt from paying the VA funding fee. You are typically not required to pay the fee if you are a veteran who is:
* Receiving VA compensation for a service-connected disability.
* Entitled to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead.
* A surviving spouse of a veteran who died in service or from a service-connected disability.
* An active-duty service member who provides evidence of having been awarded the Purple Heart before the loan closes.
To confirm your exemption, you will need a Certificate of Eligibility (COE) that states you are exempt from the funding fee. If you have a disability claim pending with the VA when you close your loan, you will likely have to pay the fee. However, if your disability is later approved with an effective date before your closing date, you can apply to the VA for a refund of the funding fee you paid.
The AIs covered the mechanics well, but here’s what I see in actual loan files: the funding fee waiver is one of the most under-communicated benefits in the VA program, and timing matters more than people realize.
If you have any service-connected disability rating—even 0%—you’re exempt from the funding fee. That’s not widely known. I’ve had clients with a 10% rating save $6,000-$8,000 on a typical purchase loan. The VA doesn’t advertise this aggressively, so many veterans pay a fee they shouldn’t have.
Here’s the part that trips people up: your Certificate of Eligibility needs to show the exemption before closing. If you have a pending disability claim, we can’t assume approval and waive the fee upfront. You’ll pay it at closing, then apply for a refund if your claim gets approved retroactively. That refund process works, but it’s paperwork and waiting—not ideal when you could have delayed closing a few weeks if you knew your rating was imminent.
One more thing the AIs didn’t mention: Purple Heart recipients are also exempt, regardless of disability rating. Bring documentation of that award and we’ll handle the exemption.
If you’re not sure about your disability status or think you might qualify, let’s pull your COE early in the process. I’d rather know now than have you overpay at closing.
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Compliance note: AI-generated answers are educational only and may contain errors. Tim Popp’s expert take reflects his professional opinion as a licensed mortgage loan originator (NMLS #2039627). For your specific situation → Book a call · Get a quote · (949) 379-1191. All loan programs subject to borrower eligibility, property requirements, and lender underwriting. Rates are not quoted on this page.
📚 Related Questions & Articles
For Different Reader Perspectives
🏠 First-Time Buyer
Quick answer: VA loans charge a one-time funding fee (usually 2-3% of the loan amount) that can be rolled into your loan so you don't pay it upfront. If you have a service-connected disability, this fee may be waived entirely, saving you thousands.
From Tim: Most first-time VA buyers don't realize the funding fee can be financed—you don't need cash for it. If you have any disability rating, even 10%, make sure we get that fee waived.
💼 Self-Employed
Quick answer: VA loans charge a funding fee (waived if you're disabled). Even as a 1099 contractor or business owner, you can use VA benefits without needing W2s—alternative income docs may work depending on your scenario.
From Tim: Self-employed and eligible for VA? You can absolutely use this benefit. We work with non-W2 income all the time—bank statements, 1099s, whatever shows your real cash flow.
🎖️ Veteran
Quick answer: The VA funding fee is a one-time cost (0.4%-3.3% of the loan) that helps sustain the VA loan program. It can be rolled into your loan. Veterans with a service-connected disability rating of 10% or higher may qualify for a full waiver.
From Tim: If you've got a disability rating, even 10%, make sure your lender waives that fee—it could save you thousands. And remember, VA loans let you buy with 0% down and no PMI.
🏘️ Investor
Quick answer: VA loans are for owner-occupants, not investors. If you're a veteran building a rental portfolio, you'll need DSCR or bank statement loans instead. Focus on programs designed for investment property cash flow and scaling.
From Tim: VA benefits are great for your primary home, but for rentals, DSCR loans let you qualify on property income—no personal tax returns needed. That's how you scale past conventional limits.
🏡 Refi / HELOC
Quick answer: If you're a veteran refinancing or tapping equity, the VA funding fee applies unless you're exempt due to disability. A cash-out VA refi may carry lower costs than a HELOC depending on your equity and goals, but compare total closing costs carefully.
From Tim: I help vets compare VA cash-out refis against HELOCs daily. If you're service-connected disabled and exempt from the funding fee, VA products often win—but every scenario is different. Let's run your numbers.