The VA funding fee is a one-time fee that helps support the VA home loan program. Most borrowers using a VA-backed or VA direct home loan pay it unless they qualify for an exemption.
The funding fee can be paid at closing or financed into the loan, but borrowers who are exempt do not have to pay it.
That can save thousands of dollars, depending on the loan amount, loan type, down payment and whether it is your first or subsequent use of the VA loan benefit.
According to the VA, you may be exempt from the funding fee if you receive VA compensation for a service-connected disability, are eligible to receive compensation but receive retirement or active-duty pay instead, receive Dependency and Indemnity Compensation as a surviving spouse, have a proposed or memorandum rating before closing that says you are eligible for compensation because of a pre-discharge claim, or are an active-duty service member who has received a Purple Heart.
VA Funding Fee Exemption Basics
| Topic |
What To Know |
| What the Funding Fee Is |
A one-time fee on many VA-backed and VA direct home loans. |
| Who May Be Exempt |
Certain Veterans, service members and surviving spouses who meet VA exemption rules. |
| Where Exemption Status Appears |
Usually on the Certificate of Eligibility, or COE. |
| What If the Status Is Wrong? |
Ask the lender to check the COE and VA records before closing. |
| Can the Fee Be Refunded? |
In some cases, yes, if you later receive disability compensation with an effective date before the loan closing date. |
What Is the VA Funding Fee?
The VA funding fee is a one-time payment that applies to many VA-backed and VA direct loans. The VA says the fee helps reduce the cost of the loan program for taxpayers because VA loans can offer benefits such as no down payment and no monthly mortgage insurance.
The fee amount depends on the loan type, down payment, whether it is your first or later use of the VA loan benefit and your military category.
You can usually either pay the funding fee in cash at closing or finance it into the loan. If you finance it, the fee becomes part of the mortgage balance and you pay interest on it over time.
Who Is Exempt From the VA Funding Fee?
VA funding fee exemptions depend on your benefit status and the timing of the exemption.
| Exemption Category |
How It Works |
| Veterans Receiving VA Disability Compensation |
You may be exempt if you receive VA compensation for a service-connected disability. |
| Veterans Entitled To Compensation But Receiving Retirement Or Active-Duty Pay |
You may be exempt if you would be entitled to disability compensation but receive retirement or active-duty pay instead. |
| Surviving Spouses Receiving DIC |
A surviving spouse who receives Dependency and Indemnity Compensation may be exempt. |
| Pre-Discharge Disability Rating |
A service member may be exempt if a proposed or memorandum rating before closing says they are eligible for compensation because of a pre-discharge claim. |
| Active-Duty Purple Heart Recipient |
An active-duty service member who provides evidence of receiving the Purple Heart may be exempt. |
How Your COE Shows Funding Fee Exemption Status
Your Certificate of Eligibility, or COE, is one of the main documents lenders use to confirm VA loan eligibility and funding fee status.
VA guidance tells lenders and servicers to rely on the funding fee status shown on the COE as evidence of a Veteran’s exemption status.
Before closing, review your COE with the lender. If the COE says you are non-exempt but you believe you should be exempt, ask the lender to check whether VA records need to be updated or whether additional documentation is needed.
What If You Have a Pending Disability Claim?
A pending disability claim can affect whether you pay the funding fee at closing or may be eligible for a refund later.
If you have a pre-discharge claim and receive a proposed or memorandum rating before closing showing you are eligible for compensation, you may be exempt from the funding fee.
If the rating is not available before closing, the funding fee may still be charged. VA guidance says if a proposed or memorandum rating is not obtained and the loan closes before the service member is discharged, the funding fee exemption does not apply and the service member will not be entitled to a refund.
For Veterans with pending compensation claims after service, a refund may be possible if VA later awards compensation and the effective date is before the loan closing date. Ask your lender how pending claims are handled before closing.
Can You Get a VA Funding Fee Refund?
You may be eligible for a refund if you paid the funding fee and later receive VA compensation for a service-connected disability with an effective date that is before your loan closing date.
The VA says it may refund the funding fee if you are later awarded VA compensation for a service-connected disability and the effective date of the compensation is before the date of the loan closing.
Refunds are not automatic in every situation. The timing of the disability effective date, the loan closing date and the way the fee was paid or financed can all matter.
How Much Can a Funding Fee Exemption Save?
The savings depend on your loan amount and the funding fee percentage that would otherwise apply.
The examples below are for educational purposes only and use simple math. Actual VA funding fee amounts depend on your loan type, down payment, prior VA loan use and military category.
| Loan Amount |
Example Funding Fee Rate |
Potential Fee Avoided If Exempt |
| $300,000 |
2.15% |
$6,450 |
| $400,000 |
2.15% |
$8,600 |
| $500,000 |
2.15% |
$10,750 |
If the fee would have been financed, the exemption can also reduce the amount you borrow and the interest paid over the life of the loan.
Does a Purple Heart Automatically Remove the Funding Fee?
Active-duty service members who have received a Purple Heart may be exempt from the VA funding fee if they provide evidence of the award on or before loan closing.
This rule is specifically tied to active-duty status. Veterans who received a Purple Heart after leaving active duty may still qualify for a funding fee exemption if they meet another exemption category, such as receiving VA disability compensation.
Because timing and documentation matter, tell your lender early if you are on active duty and have received a Purple Heart.
Do Surviving Spouses Pay the VA Funding Fee?
Some surviving spouses may qualify for VA home loan benefits, and surviving spouses who receive Dependency and Indemnity Compensation may be exempt from the funding fee.
Surviving spouse eligibility can be fact-specific, so the COE and VA eligibility review are important. Ask the lender to confirm both eligibility and exemption status before closing.
How To Confirm Your VA Funding Fee Exemption
Before closing, take these steps to confirm whether you owe the funding fee:
- Request your COE. Your COE generally shows whether you are exempt, non-exempt or whether more review is needed.
- Tell your lender about any disability claim. Pending claims, recent disability awards or pre-discharge ratings can affect your status.
- Provide documentation early. This may include VA disability award information, Purple Heart documentation or surviving spouse benefit documentation.
- Review the Loan Estimate and Closing Disclosure. The funding fee should appear if it is being charged.
- Ask about refund eligibility if your claim is pending. Timing matters, so ask before the loan closes.
The Bottom Line
VA funding fee exemptions can reduce the upfront cost of a VA loan by removing a one-time fee that many VA borrowers otherwise pay.
You may be exempt if you receive VA disability compensation, are eligible for compensation but receive retirement or active-duty pay instead, receive Dependency and Indemnity Compensation as a surviving spouse, have an eligible pre-discharge rating before closing or are an active-duty Purple Heart recipient.
Check your COE early, disclose any pending disability claim and confirm your exemption status before closing so the loan documents are accurate.
Frequently Asked Questions
Who Is Exempt From the VA Funding Fee?
You may be exempt if you receive VA disability compensation, are eligible to receive it but receive retirement or active-duty pay instead, receive Dependency and Indemnity Compensation as a surviving spouse, qualify through an eligible pre-discharge rating or are an active-duty Purple Heart recipient.
Does a VA Disability Rating Exempt You From the Funding Fee?
Receiving VA compensation for a service-connected disability can make you exempt from the VA funding fee. Your COE usually shows your exemption status.
Can I Get a VA Funding Fee Refund?
Possibly. If you paid the fee and are later awarded VA compensation for a service-connected disability with an effective date before your loan closing date, you may be eligible for a refund.
Does a Pending Disability Claim Remove the Funding Fee?
Not always. A pending claim may lead to an exemption or refund depending on the rating, effective date and timing. A pre-discharge claim generally needs a proposed or memorandum rating before closing for the exemption to apply.
Do Active-Duty Purple Heart Recipients Pay the VA Funding Fee?
Active-duty service members who have received a Purple Heart may be exempt if they provide evidence of the award on or before loan closing.
Where Can I See My Funding Fee Exemption Status?
Your Certificate of Eligibility usually shows your VA funding fee exemption status. Review it with your lender before closing.
Can the VA Funding Fee Be Financed If I Am Not Exempt?
Yes. If you are not exempt, you can usually pay the VA funding fee at closing or finance it into the loan. Financing it increases the loan balance and can increase total interest paid over time.
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