How to Waive the VA Funding Fee for Your Loan

The VA funding fee is a one-time charge applied to most VA home loans. This fee helps sustain the VA loan program, which offers benefits like no down payment requirements and competitive interest rates. While generally a mandatory cost, certain individuals are exempt from paying this fee, leading to substantial savings. This article explains who qualifies for this waiver and the process for its application.

Eligibility for Waiver

Certain individuals are exempt from paying the VA funding fee, primarily based on service-connected disabilities or specific service distinctions. Veterans who receive compensation from the VA for a service-connected disability are exempt from the funding fee, regardless of their disability rating.

Veterans eligible for service-connected disability compensation but receiving retirement pay are also exempt. Active-duty service members who have received the Purple Heart are exempt from the funding fee.

Surviving spouses of veterans who died in service, from a service-connected disability, or were totally disabled at the time of death are also exempt. Native American veterans utilizing their Native American Direct Loan (NADL) entitlement may also be exempt from the fee.

Eligibility for these exemptions is determined by the VA. This status is often reflected on an individual’s Certificate of Eligibility (COE) or through official VA disability compensation letters.

Gathering Proof of Eligibility

To confirm eligibility for the VA funding fee waiver, borrowers must provide specific documentation to their lender. The VA Certificate of Eligibility (COE) is a primary document, often indicating exemption status. Lenders can assist in requesting a COE online or through their own systems.

Official VA award letters for disability compensation serve as proof for those eligible due to a service-connected disability. Purple Heart recipients can provide their Purple Heart citations to demonstrate their exemption status.

Surviving spouses typically need to provide the veteran’s death certificate and, in some cases, a marriage certificate to verify their relationship and the veteran’s service connection. The lender will often complete VA Form 26-8937, “Verification of VA Benefits,” to confirm disability payments. Borrowers may need to provide their VA claim folder number or service number for verification.

How the Waiver is Applied

Once the necessary documentation is gathered, the lender plays a central role in applying the funding fee waiver during the loan process. The lender is responsible for verifying the borrower’s exemption status based on the documents provided, such as the COE or VA disability letters. This verification ensures that the loan accurately reflects the borrower’s eligibility.

For most eligible borrowers, if the documentation is submitted and verified early in the loan process, the waiver is applied automatically. This means the funding fee will simply not appear on the loan estimate or the final closing disclosure. The absence of the funding fee is a direct result of the confirmed exemption.

At loan closing, borrowers eligible for the waiver should observe that the VA funding fee is not included in their closing costs. The determination of the waiver status occurs early in the loan process, typically once the borrower’s eligibility is confirmed and documented. Lenders electronically remit the funding fee to the VA for non-exempt borrowers, or submit proof of exemption for those who qualify.

Addressing Incorrect Funding Fee Charges

In some situations, a veteran who believes they were eligible for a waiver might still be charged the VA funding fee. This can occur if a disability determination is made after the loan has already closed, or due to an administrative oversight. If a service-connected disability rating is retroactively awarded with an effective date prior to the loan closing, a refund may be possible.

To seek a refund for an incorrectly charged funding fee, individuals should generally contact the VA directly, specifically their VA Regional Loan Center. The VA has a dedicated refund process for such cases. For Interest Rate Reduction Refinancing Loans (IRRRLs), VA Form 26-8923 may be relevant for exemption requests.

The process typically involves providing proof of eligibility, such as updated VA disability award letters, to the VA. While the lender may assist, the final determination and issuance of the refund come from the Department of Veterans Affairs. Refunds are typically processed directly by the VA to the veteran.