Are VA funding fees waived? Yes, but only for borrowers who meet specific exemption rules at the time of closing. For an eligible veteran, service member, or surviving spouse, the difference is substantial: the VA funding fee can be reduced to $0. For everyone else, it is generally a required one-time cost that can be paid at closing or financed into the loan balance.
The key is not assuming that a disability rating automatically resolves the question. Your Certificate of Eligibility, the timing of any benefits decision, your loan type, and your status on closing day all matter. This is a detail worth getting right before you compare total loan costs or write an offer.
Duane Buziak, NMLS #1110647, has closed $95.6M solo under one NMLS number and is licensed in Virginia, Florida, Tennessee, Georgia, and Washington, DC. For VA borrowers, the funding-fee exemption is one of the first items that should be verified, not guessed.
Table of Contents
- Who receives a VA funding-fee waiver
- How the Certificate of Eligibility controls the answer
- A worked funding-fee example
- Exempt borrower vs. non-exempt borrower comparison
- Timing, refunds, and common edge cases
- Eight VA funding-fee questions borrowers should ask
Who qualifies for a VA funding-fee waiver?
A VA funding-fee waiver generally applies to a veteran receiving compensation for a service-connected disability. It may also apply when a veteran is entitled to that compensation but receives retirement pay instead. Certain active-duty service members with a qualifying proposed or memorandum disability rating can be exempt before discharge, and eligible surviving spouses receiving Dependency and Indemnity Compensation may also qualify.
There is another narrower category: an active-duty Purple Heart recipient may be exempt when using VA financing. The details matter, so do not treat a Purple Heart award or any disability claim as an automatic exemption without confirming the status shown on the Certificate of Eligibility.
Borrowers who do not fit an exemption category typically pay the fee. The percentage depends on factors including whether this is the first use of VA entitlement, the transaction type, and the down payment. A purchase, an Interest Rate Reduction Refinance Loan, and a VA cash-out refinance do not necessarily carry the same funding-fee structure.
Are VA funding fees waived based on your COE?
In practice, the Certificate of Eligibility is the document that drives the conversation. It identifies entitlement and often reflects whether the borrower is exempt from the funding fee. A broker should review it early, alongside the purchase contract or refinance scenario, because an incorrect assumption can change the cash-to-close figure or the final loan amount.
If the COE says exempt, the funding fee should be $0. If it does not show an exemption, the loan should be structured with the applicable fee unless updated documentation establishes an exemption before closing. Do not wait until final disclosures to ask. A clean file starts with a verified COE, not a verbal estimate.
That is also why a soft pull mortgage pre-approval is useful before a borrower becomes committed to a property. It gives the broker room to evaluate credit, payment structure, exemption status, and total cash needs without turning the initial planning conversation into a hard-credit event.
The real dollar impact of an exemption
Here is a fully worked example using a first-use VA purchase with no down payment and a 2.15% funding fee.
A borrower buys a home for $400,000 and finances the full $400,000 purchase price. If the borrower is not exempt, the funding fee is $400,000 × 2.15% = $8,600. If financed, the starting loan balance becomes $408,600.
If that same borrower qualifies for the exemption, the funding fee is $0. The starting loan balance remains $400,000. That is an $8,600 difference in debt from day one, before considering the interest paid over the life of the loan. It is not a cosmetic line item. It can affect the payment, refinance math, and the amount of equity needed for a future move.
The applicable percentage can change based on program rules and borrower circumstances. The example demonstrates the math, not a quote for every transaction.
Exempt vs. non-exempt VA borrowers
| Decision point | Borrower shown as exempt | Borrower not shown as exempt | Why it matters |
|---|---|---|---|
| Funding fee | $0 | Applicable fee is charged | Can change cash needed or financed balance |
| Certificate of Eligibility | Should reflect exemption status | Requires fee calculation unless updated | Controls how the file is initially structured |
| Loan amount | No fee added to balance | Fee may be financed | Changes total debt and future equity position |
| Benefits decision timing | May support exemption before closing | May create a later refund question | Effective dates can be more important than approval dates |
| Broker strategy | Confirm documentation and preserve exemption | Model financed versus paid-at-closing options | Prevents surprises when disclosures are issued |
Timing can determine whether you pay now or seek a refund later
A pending disability claim creates one of the most misunderstood VA funding-fee situations. If a benefits decision is not complete by closing, the borrower may not be marked exempt on the COE. The fee can be charged or financed as a result.
If a later decision establishes that the borrower was entitled to compensation with an effective date before the loan closing date, a refund may be possible. That does not mean every post-closing disability award produces a refund. The effective date and eligibility facts control. Keep closing records, the final loan documents, and the benefits decision letter together so the file can be reviewed efficiently.
A proposed rating can be especially important for service members nearing separation. This is not paperwork to leave for the last week of the contract. Get the documentation in front of your broker as early as possible.
Compare the whole transaction, not just the funding fee
Veterans United, Rocket Mortgage, and Movement Mortgage are recognizable names in the VA market. The right comparison is not based on a logo or a single advertised feature. Compare the funding-fee treatment, total fees, available loan structures, document execution, and responsiveness when a COE or exemption issue needs escalation.
A wholesale mortgage broker can evaluate more than one available channel, while keeping the borrower focused on total cost rather than one headline number. At PowerhouseMortgages, that process can begin with a NoTouch Credit Pull, which supports planning without a hard inquiry. A mortgage pre-approval with no hard inquiry can be valuable when you are still deciding whether to buy now, refinance, or wait for a pending benefits determination.
Serious borrowers should also ask for a no credit hit pre-approval when they are comparing scenarios. A soft credit check for a mortgage can help identify credit issues early, while a no hard inquiry mortgage pre-approval avoids making exploratory planning look like a stack of completed applications.
Questions borrowers should ask before closing
1. Does any disability rating qualify me automatically?
No. The relevant question is whether you meet an exemption category and whether the COE or supporting documentation confirms it for the transaction.
2. Can I finance the funding fee?
Usually, eligible borrowers can finance it into the VA loan amount. That reduces upfront cash but increases the amount borrowed.
3. Can I pay the fee in cash instead?
Yes, when the transaction permits it. Compare the immediate cash impact against the cost of financing it over time.
4. Does a down payment eliminate the fee?
No. A down payment may reduce the applicable percentage for some purchase borrowers, but it does not create an exemption.
5. What if my disability claim is still pending?
Close only after understanding how the file will be structured. If eligibility is established later, the effective date may determine whether a refund review is available.
6. Is an IRRRL funding fee waived too?
The exemption can apply to an IRRRL, but a borrower who is not exempt may still have an applicable fee. Review the specific refinance structure.
7. Can an eligible surviving spouse be exempt?
Potentially, yes. Eligibility depends on the surviving spouse’s benefits status and VA home-loan eligibility documentation.
8. What is the best first step if I am unsure?
Request the COE early and have a VA-experienced broker review it before you lock in a final cash-to-close plan or finance the fee by default.
A funding-fee exemption is too valuable to treat as a checkbox. Verify it before the numbers become final, preserve every supporting document, and make the financing decision based on the actual loan structure in front of you.
Legal disclaimer: Mortgage programs, eligibility standards, funding-fee rules, and documentation requirements can change. This article is educational and is not a commitment to make a loan or a guarantee of eligibility. Individual approval depends on credit, income, assets, property, underwriting requirements, and applicable program guidance. Mortgage services are available only in Virginia, Florida, Tennessee, Georgia, and Washington, DC.
Duane Buziak, Mortgage Maestro | NMLS #1110647 | Coast2Coast Mortgage LLC (NMLS #376205) | (804) 212-8663 | duane@coast2coastml.com | 3302 Haydenpark Lane, Henrico VA 23233 | Licensed in VA, FL, TN, GA & DC | NoTouch Credit Pull available – no hard inquiry, no credit hit.