VA Funding Fee Reduction for Disabled Veterans: 2026 Eligibility, Exemptions, and Refunds
November 3, 2026
5 Mintues
Veterans who receive VA compensation for a service-connected disability do not pay the VA funding fee on VA home loans. The exemption removes the fee entirely and depends on receiving, or being eligible for, compensation, not on a specific disability percentage.
What Is the VA Funding Fee for Disabled Veterans?
The VA funding fee is a one-time payment on a VA-backed or VA direct home loan. It offsets program costs because VA loans require no down payment or monthly mortgage insurance. Pay it at closing or finance it.
Who Qualifies for a VA Funding Fee Exemption in 2026?
According to the Department of Veterans Affairs (VA), you are exempt if you:
- Receive compensation for a service-connected disability.
- Are eligible for compensation but receive retirement or active-duty pay instead.
- Are a surviving spouse receiving Dependency and Indemnity Compensation (DIC).
- Are a service member with a proposed or memorandum rating, issued before closing, saying you are eligible for compensation.
- Are on active duty and provide evidence of a Purple Heart on or before closing.
Does a Disability Rating Automatically Qualify?
Not by itself. A rating measures a service-connected condition; compensation is the benefit VA pays. VA’s exemption criteria turn on compensation and list no minimum percentage. Your Certificate of Eligibility (COE) shows your funding fee status, so confirm it there.
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How Much Can Disabled Veterans Save?
VA’s funding fee chart, effective April 7, 2023, was still published when VA.gov was last updated October 5, 2026. Exempt borrowers pay none of these.
| VA loan category | First use | After first use |
|---|---|---|
| Purchase or construction, less than 5% down | 2.15% | 3.3% |
| Purchase or construction, 5% or more down | 1.5% | 1.5% |
| Purchase or construction, 10% or more down | 1.25% | 1.25% |
| Cash-out refinance | 2.15% | 3.3% |
| Interest Rate Reduction Refinance Loan (IRRRL) | 0.5% | 0.5% |
The fee is a percentage of the loan amount, not the purchase price. A first-use, no-down-payment $200,000 loan carries a 2.15% fee of $4,300, which an exempt Veteran does not pay.
How Can You Verify Your VA Funding Fee Exemption Before Closing?
Lenders rely on the funding fee status shown on your COE. To confirm it:
- Request your COE on VA.gov or ask your lender to retrieve it.
- Check that the funding fee status reads exempt.
- If not, give your lender the compensation documents it requests, such as an award letter [VERIFY CURRENT LENDER DOCUMENT REQUIREMENTS]. VA instructs lenders to ask whether a claim is pending.
- Confirm your Loan Estimate and Closing Disclosure omit the fee.
Can Disabled Veterans Get a VA Funding Fee Refund After Closing?
Sometimes. If your claim is pending at closing and you are not otherwise exempt, expect to pay the fee. You may get a refund if VA later awards compensation effective before your closing date. A proposed or memorandum rating received after closing does not qualify.
For example, a Veteran who closes in March and is awarded compensation in May with a January effective date may qualify. Call your VA regional loan center at 877-827-3702 (TTY: 711), Monday through Friday, 8:00 a.m. to 6:00 p.m. ET.
FAQs
Do all disabled Veterans qualify for a funding fee exemption?
No. VA exempts Veterans who receive, or are eligible to receive, service-connected disability compensation, plus certain surviving spouses and Purple Heart recipients.
Does a 10% VA disability rating qualify?
Yes, if it results in VA compensation, because the exemption depends on compensation, not the percentage. Confirm your status on your COE.
Does the exemption apply to refinancing?
Yes. VA charges the fee on refinances, including cash-out loans and IRRRLs, unless an exemption applies.
Can I finance the VA funding fee?
If you are not exempt, yes. On purchase loans, it is the only closing cost you can finance.
Source: VA funding fee and loan closing costs, VA.gov, last updated October 5, 2026; VA Circular 26-19-17.
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Jamie is a mortgage industry executive and CEO of the Mortgage Division at ReAlpha Tech Corp (NASDAQ: AIRE), with more than 25 years of experience across operations, sales, compliance, and senior leadership. A sustained top-producing Loan Originator with multiple years of $100M+ in personal production, Jamie pairs strategic vision with deep operational fluency. Based in Southern California, Jamie serves on the Advisory Boards of 20/20 Vision for Success and the Broker Action Coalition and speaks widely on mortgage leadership, sales strategy, and industry transformation.