What Qualifies for VA Funding Fee Exemptions?

We are often asked who is exempt from paying the VA funding fee at closing. At HomePromise, our VA home loan experts are standing by to answer your questions and help guide you as you make these important financial decisions. In this article, we will look at what Qualifies for VA Funding Fee Exemptions.

What is the VA Funding Fee?

The VA funding fee is an additional cost that service members, veterans, or surviving spouses must pay when obtaining a VA loan. The funding fee helps cover the losses from other defaulted VA loans made to military members and veterans who stop making their mortgage payments. It keeps the VA loan program healthy and makes sure this program is still available for veterans and their families for years to come. 

The History of the VA Home Loan Program

The Servicemen’s Readjustment Act, most commonly referred to as the GI Bill of Rights, was passed in 1944. The GI Bill of Rights included the VA home loan program. This piece of legislation was signed into law by Franklin D. Roosevelt with the goal of reshaping the American economy by creating a level playing field for veterans of World War II. Helping make home loans more accessible through the VA home loan benefits program was a major part of accomplishing this goal. 

There have been many updates to the laws and rules surrounding VA loans since the program began. Some increased the buying power and capabilities of veterans using the VA loan program, while others provided more regulation to make sure this program remains available for future generations.

HomePromise understands the long history of the VA home loan program and the important role it plays in helping veterans and their families buy homes. Whether you have questions about funding fee rates, discount points, the benefit of qualifying by receiving VA compensation, or any other VA mortgage questions, we’re here to help.

What Qualifies for VA Funding Fee Exemptions?

VA Funding Fee Exemptions for Disabled Veterans and Surviving Spouses

Disabled veterans are exempt from the VA funding fee. If you are currently receiving compensation for a  service-connected disability, you can waive the VA funding fee regardless of your level of disability. Surviving spouses of veterans who passed away in action and active-duty military service members who have received a Purple Heart are also exempt from paying the VA funding fee.

Here is a detailed list of qualifications for exemption from the VA funding fee: What Qualifies for VA Funding Fee Exemptions?

VA Funding Fee Exemptions
  • You’re a disabled veteran currently receiving VA disability compensation for a disability sustained during service
  • You’re currently in the process of applying for VA disability compensation but you haven’t started receiving payments yet. In this case, the VA funding fee would be returned to you after your disability payments begin as long as get your disability approved soon after closing. 
  • You’re an active-duty service member who has received a Purple Heart
  • You’re the surviving spouse of a veteran who passed away in action or from a service-related disability

How Much is the VA Funding Fee? 

Being exempt from the VA funding fee can help disabled veterans and surviving spouses save thousands of dollars in out-of-pocket fees when purchasing a home or refinancing their current one. If you closed on your loan before you started receiving your disability benefits, you may be able to have your VA funding fee refunded back to you. However, you must receive your disability benefits approval within a short time after closing on your VA loan. 

The cost of the VA funding fee is based on your total loan amount, not the purchase price of your home. It varies based on the size of the down payment and if this is your first time using the VA loan program. Return users of the VA loan program pay a higher VA funding fee compared to buyers who are using the VA loan program for the first time.

Below is a chart detailing how mortgage lenders calculate the VA funding fee: What Qualifies for VA Funding Fee Exemptions?

First-Time VA Loan User After First Use of the VA Loan Down Payment Amount
2.3% 3.6% Less than 5%, including no down payment
1.65% 1.65% 5% or more
1.4% 1.4% 10% or more

These percentages have a big impact on out-of-pocket costs at closing if you are not exempt from the VA funding fee. Below are a few examples of how much the VA funding fee can cost people based on their total loan amount: What Qualifies for VA Funding Fee Exemptions?

Down Payment Amount $150,000 VA Loan Amount $200,000 VA Loan Amount $250,000 VA Loan Amount
First-time use Less than 5% $3,450 $4,600 $5,750
First-time use 5% or more $2,475 $3,300 $4,125
First-time use 10% or more $2,100 $2,800 $3,500
After first use Less than 5% $5,400 $7,200 $9,000
After first use 5% or more $2,475 $3,300 $4,125
After first use 10% or more $2,100 $2,800 $3,500

As a VA borrower, if you have questions about your exemption from the VA funding fee, call HomePromise to speak with one of our VA home loan experts at 800-720-0250. They will review your credit score, income sources, and credit history before providing you with a free quote. 

How Does the VA Funding Fee Work with a Cash-Out Refinance?

A cash-out refinance helps you take full advantage of the equity you’ve built in your home. At loan closing, you receive funds to use for various purposes.  Perhaps you are looking to refinance your home with the goal of pulling cash out to pay off existing liens, renovate your home, or cover other expenses. Below is a chart showing the VA funding fees for cash-out refinances:

First-Time Use After First Use
VA Funding Fee Percentage 2.3% 3.6%

This means that if you are refinancing to the below total loan amounts, the VA funding fees would be: 

$100,000 Total Loan Amount $200,000 Total Loan Amount $250,000 Total Loan Amount
First-Time Use $2,300 $4,600 $5,750
After First Use $3,600 $7,200 $9,000

Being able to waive the VA funding fee offers those who are exempt significant cost savings when doing a cash-out refinance. To learn more about a cash-out refinance for your home, call HomePromise at 800-720-0250.

Other VA Loan Benefits Available to Disabled Veterans

In addition to being exempt from paying the VA funding fee, disabled veterans may also be eligible for special housing grants, real estate property tax exemptions, and disability compensation benefits for veteran income. These benefits are in addition to the benefits already available to veterans, military service members, and surviving spouses when applying for VA loans, including options for lower credit scores, limits on closing costs, competitive interest rates, and no private mortgage insurance. Call our VA lending experts at 800-720-0250 for more information.

How Your Credit Score Impacts Your VA Home Loan Eligibility

The Department of Veterans Affairs has no minimum credit score requirements when applying for a VA home loan. Instead, the Department of Veterans Affairs requires mortgage lenders to review the overall credit history, sources of income, and credit score of the person when determining their eligibility for a VA loan.  The HomePromise minimum credit score for VA loans is 580.

In general, having a higher credit score typically means you will receive a lower interest rate. Having a higher credit score means you are less of a credit risk for mortgage lenders, which is why they reward you with a higher rate.

To further understand how your credit score impacts your VA home loan eligibility, call our HomePromise VA loan experts at 800-720-0250. Our professionals will review your credit score and provide you with a free quote.

Talk to a HomePromise VA Loan Expert

HomePromise is a knowledgeable and compassionate lender approved by the Department of Veterans Affairs to provide VA home loans. We provide convenient options for applying for VA home loans, including online and over the phone.  If you have questions about how to get a Certificate of Eligibility (COE) or how to qualify for a VA streamline refinance (IRRRL) please give us a call.

Learn more about how your exemption from the VA funding fee can save you thousands of dollars at closing by calling our HomePromise VA loan experts at 800-720-0250!

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