VA Loan Funding Fee Explained: Find Out If You Qualify for a Waiver!

by Skylar St. Pierre

The VA loan funding fee is an essential part of the VA loan program, but many veterans don’t realize that exemptions are available. While some veterans are required to pay this one-time fee, others—such as those with service-connected disabilities—may qualify for a waiver. In this blog, we’ll explain how the VA loan funding fee works, how it’s calculated, and who is eligible for an exemption.

The VA Loan Myth

Myth: All veterans must pay a high funding fee to use a VA loan.
Fact: Veterans with service-connected disabilities and certain other qualifications are exempt from paying the funding fee.

What Is the VA Loan Funding Fee?

The VA loan funding fee is a one-time payment made by veterans when they close on their VA loan. It helps sustain the VA loan program, ensuring future veterans can access the benefit. Veterans have the option to pay the fee upfront or roll it into their loan.

Factors That Affect the Funding Fee:

First-Time Use vs. Subsequent Use: First-time users typically pay a lower funding fee than those using the benefit again.
Down Payment Amount: Veterans who put down at least 5% may qualify for a reduced fee.
Type of Loan: The fee structure differs based on whether the loan is for purchasing a home or refinancing.

Who Is Exempt from Paying the Funding Fee?

Veterans with Service-Connected Disabilities
Veterans receiving compensation for service-connected disabilities are exempt.
Surviving Spouses
Spouses of veterans who died in service or due to a service-related disability are also exempt.
Active-Duty Purple Heart Recipients
Service members awarded the Purple Heart while on active duty are exempt from paying the funding fee.

How Much Is the VA Loan Funding Fee?

The fee is calculated as a percentage of the total loan amount:

First-Time Use: 2.3% of the loan amount with no down payment.
Subsequent Use: 3.6% of the loan amount with no down payment.
Reduced Fees: Veterans who make a down payment of at least 5% may qualify for a lower fee.

Conclusion:
The VA loan funding fee is vital to the VA loan program, but not all veterans are required to pay it. Veterans with service-connected disabilities, surviving spouses, and active-duty Purple Heart recipients often qualify for exemptions. If you’re unsure whether you need to pay, it’s worth exploring the qualifications for a waiver.