The VA loan funding fee is one of the first things veterans notice when they see their Loan Estimate — and one of the first questions I get as a broker: “Can I get out of paying this?” The short answer is yes, if you qualify.
The VA funding fee ranges from 1.25% to 3.3% of the loan amount depending on your loan type, down payment, and whether you’ve used your VA benefit before. On a $350,000 purchase, that’s $4,375 to $11,550 added to your loan balance or paid at closing. That’s real money — and it’s legally waivable for veterans who meet specific criteria.
This guide walks you through exactly how to determine if you’re exempt, how to document it properly, and what to do if you’re borderline eligible or not yet exempt. Whether you’re purchasing your first home, refinancing with an IRRRL, or doing a cash-out refinance, the steps here apply. And if you don’t qualify for a full exemption, I’ll show you the legal strategies that reduce what you pay.
I’m Duane Buziak, NMLS #1110647, a VA loan specialist licensed across Virginia, Florida, Tennessee, and Georgia. This is the broker’s-eye view — not a sales pitch. If you want to start the process without a hard inquiry hitting your credit report, use our NoTouch Credit Pull for a no hard inquiry mortgage pre approval before we go any further. Real numbers, zero credit impact.
Let’s get into it. Understanding how a VA loan works is the foundation — but knowing how to protect your exemption is where the real savings live.
Step 1: Determine If You Qualify for a Full VA Funding Fee Exemption
Before you do anything else, you need to know whether you’re in the exempt category. The VA formally exempts specific groups — and the rules are more nuanced than most borrowers realize. Getting this wrong in either direction costs you: either you pay a fee you didn’t have to, or you delay closing trying to claim an exemption you don’t actually qualify for.
The three primary exemption categories, per VA.gov, are:
Veterans receiving VA disability compensation: If you are currently receiving monthly VA compensation for a service-connected disability, you are exempt from the funding fee. The disability rating percentage does NOT need to be 10% or higher. Any rating that results in active compensation payments qualifies you. A 10% rating with compensation? Exempt. A 100% rating? Exempt. A 0% rating with no compensation? Not exempt — and this is the most common mistake I see.
Surviving spouses receiving Dependency and Indemnity Compensation (DIC): Surviving spouses of veterans who died in service or from a service-connected disability are exempt — but only if they are actively receiving DIC payments from the VA. Not all surviving spouses qualify automatically. If you’re receiving a standard survivor benefit but not specifically DIC, you do not fall under this exemption. Verify your benefit type before assuming you qualify.
Active-duty service members who have received a Purple Heart: This exemption applies specifically to service members on active duty at the time of closing. If you received a Purple Heart but have since separated from service and are not receiving VA disability compensation, this particular exemption pathway does not apply — though you may qualify under the disability compensation category if you have a service-connected rating.
There’s a fourth category that most borrowers miss entirely: pre-discharge veterans with a proposed or memorandum disability rating from the VA before closing. If you are still on active duty or in the discharge process and the VA has issued a proposed rating — even before it’s finalized — you may qualify for the exemption at closing. This requires your broker to submit VA Form 26-8937 on your behalf, but it can save you thousands if your rating is finalized retroactively.
One more nuance worth knowing: veterans who are entitled to receive compensation but are instead receiving military retirement pay or active-duty pay are also exempt. The VA recognizes the entitlement, not just the payment stream.
The critical pitfall here is assuming. I’ve seen veterans with legitimate disability ratings pay the funding fee because they — or their loan officer — assumed the exemption was automatic. It is not. You must verify your compensation status at the VA eBenefits portal and confirm it is reflected on your Certificate of Eligibility before your loan closes.
Success indicator: You can clearly state your disability rating AND confirm you receive monthly VA compensation payments, or you have DIC documentation as a surviving spouse. If both are true, move to Step 2.
For a deeper breakdown of how the funding fee is structured across loan types, see our VA loan funding fee explained guide.
Step 2: Pull Your Certificate of Eligibility and Verify the Exemption Flag
Knowing you’re exempt is not the same as having your exemption documented in the VA’s system. Your Certificate of Eligibility (COE) is the official document that triggers the funding fee waiver at closing. If it doesn’t reflect your exempt status, the lender will charge the fee — and correcting it after closing is a much longer process than getting it right beforehand.
Here’s how to get your COE and verify it shows the correct status.
Option 1 — Pull it yourself: Access your COE through the VA eBenefits portal. Log in with your DS Logon or ID.me credentials, navigate to the home loan section, and request your COE. Once generated, look specifically for the funding fee exemption indicator. It will explicitly state whether you are exempt. If it shows exempt, you’re in good shape. If it doesn’t — or if the field is blank — you have work to do.
Option 2 — Have your broker pull it: As an independent broker with access to the VA’s Automated Certificate of Eligibility (ACE) system, we can pull your COE directly in many cases — often within minutes. This is faster than navigating eBenefits yourself, and we can flag discrepancies immediately rather than discovering them three days before closing. Our step-by-step guide on getting your VA loan Certificate of Eligibility walks through every method in detail.
If your COE does not show exempt status but you believe you qualify, the fix happens at the VA level, not the lender level. No lender or broker can override what the COE says — they can only work with what the VA’s system reflects. The correction process requires submitting VA Form 26-8937 (Verification of VA Benefits) through your VA Regional Loan Center. This form triggers the VA to verify your disability compensation status and update your COE accordingly.
Find your nearest VA Regional Loan Center using the VA’s location finder — filter by “VA Regional Loan Center” to get the right office for your state.
Timeline reality: COE updates after a Form 26-8937 submission can take anywhere from a few business days to several weeks, depending on VA workload. If you’re in an active purchase transaction with a closing date, you cannot afford to start this process late. Start it the moment you begin shopping for a home — or better yet, before you make an offer.
One important distinction: if you are a pre-discharge veteran with a proposed or memorandum rating, your COE may not automatically reflect exempt status even if you qualify. In this case, your broker submits Form 26-8937 with your proposed rating documentation, and the VA will verify and update accordingly. This is the most document-intensive pathway, but it works.
Success indicator: Your COE explicitly states “exempt from funding fee,” or your broker confirms the exemption flag is active in the VA’s ACE system before your closing date is set.
Step 3: Gather the Right Documentation to Prove Exempt Status
Having the right paperwork — and having it ready before your broker needs it — is what separates a smooth closing from a last-minute scramble. Documentation requirements differ by exemption category, and submitting the wrong document causes delays that can push your closing date.
Here’s exactly what you need, organized by exemption type.
For veterans receiving VA disability compensation: Your VA award letter showing your current monthly compensation amount and your disability rating percentage. The letter must be current — within the last 12 months is the standard most lenders and the VA will accept. If your award letter is older than that, request an updated benefits verification letter through your VA.gov account or at a VA regional office.
For surviving spouses receiving DIC: Your DIC award letter from the VA. This is a specific document — it is not the same as a general survivor benefit letter, and it must specifically reference Dependency and Indemnity Compensation. If you’re unsure whether your letter qualifies, bring it to your broker before assuming you’re covered. The Virginia Department of Veterans Services (DVS) is a useful resource for Virginia veterans who need help obtaining or verifying VA benefit documentation.
For pre-discharge veterans with proposed ratings: Your memorandum rating document or proposed rating letter from your VA Regional Office. This is the most document-intensive pathway. Your broker will need to submit VA Form 26-8937 on your behalf, attaching this documentation so the VA can verify the proposed rating and update your COE. Keep copies of everything — the original rating document, any correspondence from the VA, and the Form 26-8937 submission confirmation. A comprehensive VA loan document checklist can help you track every required item and avoid last-minute scrambles.
For Purple Heart recipients on active duty: Your Purple Heart citation and your current active-duty orders. Both documents are required. The citation proves the award; the orders confirm you are on active duty at the time of closing. If you separate from service before closing, this specific exemption pathway no longer applies — though you should immediately check whether a service-connected disability rating qualifies you under the compensation exemption instead.
There are two things to avoid that I see cause problems regularly. First, do not assume your broker or closing agent will automatically know you’re exempt. You must proactively provide documentation — the burden is on you to surface this information, not on the lender to discover it. Second, do not wait until you’re under contract to gather these documents. Some of them take time to obtain, and the VA’s processing timeline doesn’t adjust for your closing date.
Success indicator: Your Loan Estimate and Closing Disclosure both show $0 for the VA funding fee line item, and you have copies of all supporting documentation in your personal loan file.
Step 4: If You’re Not Exempt, Use These Legal Strategies to Reduce the Fee
Not every veteran qualifies for a full exemption — and if you don’t, the funding fee is not a fixed, unavoidable cost. There are legitimate, VA-approved strategies that can meaningfully reduce what you pay. Here are the five I use most often with clients.
Strategy 1 — Increase your down payment: The VA funding fee drops significantly as your down payment increases. On a first-use purchase loan, the fee structure is: 2.15% with less than 5% down, 1.50% with 5–9.99% down, and 1.25% with 10% or more down. These tiers are published by VA.gov and apply regardless of which lender you use.
Here’s the math that makes this concrete. On a $350,000 purchase with no down payment, the 2.15% funding fee equals $7,525. Put 10% down ($35,000), and your loan drops to $315,000. The 1.25% fee on that balance is $3,938. The funding fee reduction alone is $3,587 — before factoring in the lower loan balance and the interest savings that come with it over the life of the loan.
Strategy 2 — Understand subsequent-use fee jumps: If this is your second or later VA loan use with less than 5% down, the fee jumps to 3.30%. That’s $11,550 on a $350,000 loan. But put 5% down, and the fee drops back to 1.50% regardless of prior use. If you’re a subsequent user, the 5% down threshold is one of the highest-leverage decisions you’ll make on this transaction.
Strategy 3 — Negotiate seller concessions: VA loan rules allow sellers to pay up to 4% of the purchase price in concessions. The funding fee is an allowable seller-paid cost. On a $350,000 purchase, the 4% concession ceiling is $14,000. If your funding fee is $7,525, a seller concession covering that cost is well within the allowable limit and eliminates the fee from your out-of-pocket entirely. Build this into your purchase offer negotiation — your real estate agent and broker can structure it in the contract language.
Strategy 4 — Finance it into the loan: If paying the fee out of pocket creates a cash flow problem, you can roll it into the loan balance. This doesn’t eliminate the fee — you’ll pay interest on it over the loan term — but it preserves your cash for reserves, moving costs, or other immediate needs. For veterans who are cash-constrained at closing, this is often the right trade-off.
Strategy 5 — IRRRL refinance: If you’re refinancing an existing VA loan with an Interest Rate Reduction Refinance Loan (IRRRL), the funding fee is only 0.50% — significantly lower than the 2.15% or 3.30% that applies to new purchases or cash-out refinances. If your goal is to lower your rate on an existing VA loan, see our full breakdown of VA streamline refinance requirements to confirm you qualify for this cost-efficient path.
For veterans purchasing in high-cost areas, loan limit context matters too. See our guide on VA loans in high-cost areas for how loan amounts interact with fee calculations.
Success indicator: Your Loan Estimate reflects the lowest applicable fee tier for your specific scenario — whether that’s through a down payment tier, seller concession, or IRRRL structure.
Step 5: Work With a Broker Who Shops the Fee Structure Across 500+ Lenders
Here’s something worth being direct about: the funding fee exemption is set by the VA. It’s the same regardless of which lender or broker you use. But origination fees, lender fees, and interest rates are NOT set by the VA — and they vary dramatically between lenders. This is where working with an independent broker versus a direct lender makes a measurable difference in your total cost.
As an independent mortgage broker, we submit your loan to multiple wholesale lenders simultaneously and compare total cost — not just the interest rate. A direct lender like Veterans United or Rocket Mortgage can only offer you their own product shelf. We shop 500+ wholesale lenders and bring you the best combination of rate, fees, and terms for your specific profile.
For veterans with credit scores below 620, this distinction is especially significant. Our VA loan credit score floor is 500 — versus Veterans United’s 620 minimum. If your score is between 500 and 619, working with a direct lender that requires 620 simply means you don’t get approved. Working with a broker who has access to wholesale lenders with lower floors means you do.
The NoTouch Credit Pull is how we start every pre-qualification. It’s a soft credit pull mortgage approach — we pull your credit profile without a hard inquiry, which means no impact to your credit score. You get real numbers: estimated rate, estimated payment, funding fee status, and a clear picture of your options. This is what we call a mortgage pre approval without hard pull — you see the full picture before you commit to a full application.
Once you have a Loan Estimate from any source — Veterans United, Rocket, Movement, anyone — bring it to us. Our Dare to Compare process puts your existing estimate side by side with what our wholesale network can offer. Rate, origination fees, total closing costs, funding fee status. Line by line. If we can beat it, we’ll show you exactly where and by how much. If we can’t, we’ll tell you that too.
For veterans who qualify, we can also structure loans to minimize or eliminate out-of-pocket closing costs through lender credits and seller concession strategies. Ask about our no-out-of-pocket closing options when you reach out.
We’re licensed in Virginia, Florida, Tennessee, and Georgia. The same broker relationship, the same wholesale lender access, the same 500 FICO floor — regardless of which state your property is in. For a full comparison of how broker access stacks up against direct lenders, see our best VA home loan lender breakdown.
Success indicator: You have a Loan Estimate showing your funding fee status (exempt or lowest applicable tier) alongside a competitive rate and fee structure from wholesale pricing — not a single-shelf retail offer.
Step 6: Confirm Your Exemption at Closing and Know Your Refund Rights
The final step is verification at the closing table — and knowing what to do if something is wrong. Federal law requires lenders to provide your Closing Disclosure (CD) at least three business days before closing. Use that window. Don’t wait until you’re sitting at the closing table to read it.
Find the funding fee line item on your CD. It typically appears in Section A under “Origination Charges” or as a separately labeled line item. If you’re exempt, it must show $0. If it shows any dollar amount and you have documented exempt status, stop. Do not close until the discrepancy is corrected. Closing with an incorrect funding fee creates a refund process that can take months — and you’ll have already paid money you didn’t owe.
If the CD shows a fee you shouldn’t be paying, contact your broker immediately. The correction needs to happen at the lender level, and it requires a revised CD — which triggers another three-business-day waiting period. This is why catching it early matters. A corrected CD issued on the day of closing doesn’t satisfy the federal waiting period requirement. For a complete breakdown of every line item veterans should review, our VA loan closing costs breakdown covers each fee in detail.
Now, what if you already paid a funding fee and later receive a disability rating that’s retroactive to before your closing date? You are entitled to a refund. The VA does process these refunds, but they are not automatic. You must initiate the request through your VA Regional Loan Center, submitting your award letter and documentation showing the effective date of your disability rating predates your closing. The refund covers the full funding fee paid.
Pre-discharge veterans should document their timeline carefully. If your disability rating is finalized after closing but was proposed before closing, you may still qualify for a retroactive refund — but only if you can demonstrate the proposed rating existed before your closing date. Keep copies of every VA communication, every proposed rating document, and every Form 26-8937 submission.
Virginia veterans who encounter delays or documentation issues at the federal level can contact the Virginia Department of Veterans Services (DVS) for assistance. DVS offices can help with VA benefit documentation, COE issues, and navigating the VA system — a useful resource when federal processing timelines are slow.
For a complete breakdown of what appears on your Closing Disclosure and how VA closing costs are structured, see our VA loan closing costs guide.
Success indicator: Your signed Closing Disclosure matches your Loan Estimate on the funding fee line, and you have copies of all exemption documentation filed in your personal loan records.
Your VA Funding Fee Action Checklist and Next Steps
Before you move forward, run through this checklist. Every item here corresponds to a step above — if you can check all six, you’re protected.
1. Confirm your disability compensation status or DIC eligibility with the VA — not just your rating, but active payment confirmation.
2. Pull your Certificate of Eligibility and verify the exemption flag is active — through eBenefits or through your broker’s ACE system access.
3. Gather your current award letter or applicable documentation — VA award letter, DIC letter, proposed rating memo, or Purple Heart citation with active-duty orders.
4. If not exempt, calculate your down payment tier options and seller concession strategy — use the worked dollar example from Step 4 as your baseline.
5. Use the NoTouch Credit Pull for a soft credit pull mortgage pre-qualification — no hard inquiry, no credit score impact, real numbers before you commit.
6. Review your Loan Estimate and Closing Disclosure for $0 on the funding fee line, or confirm the correct reduced tier is applied.
Comparison Table: VA Loan Broker vs. Direct Lenders
| Provider | FICO Minimum | Lender Type | Loan Shelf | Fees / Origination |
|---|---|---|---|---|
| VaLoansPro.com | 500 | Independent Broker | 500+ wholesale lenders | Broker-negotiated; no-out-of-pocket closing options available |
| Veterans United | 620 | Direct Lender | VA-specialty single shelf | Origination fees on the higher side; no loan shopping across investors |
| Rocket Mortgage | Not publicly disclosed for VA | Direct Lender | Single product shelf | Full hard-pull application required before real numbers are provided |
| Movement Mortgage | 580 (VA) | Direct Lender | Single product shelf | Full application required; hard pull at application |
Frequently Asked Questions
What is the VA loan funding fee and why do I have to pay it? The VA funding fee is a one-time charge paid to the Department of Veterans Affairs to help sustain the VA home loan program for future generations of veterans. It ranges from 0.50% to 3.30% of the loan amount depending on loan type, down payment, and prior VA loan use. It can be paid at closing or financed into the loan balance.
Who is automatically exempt from the VA funding fee? Veterans receiving VA compensation for a service-connected disability, surviving spouses receiving Dependency and Indemnity Compensation (DIC), active-duty service members who have received a Purple Heart, and veterans with proposed or memorandum disability ratings pre-discharge are exempt. The exemption must be reflected on your Certificate of Eligibility — it is not applied automatically without documentation.
Does my disability rating percentage affect whether I’m exempt? No. Any disability rating that results in active VA compensation payments qualifies you for the exemption — there is no minimum percentage threshold. A 10% rating with compensation makes you exempt. A 0% rating with no compensation does not. The key factor is whether you are actively receiving compensation payments, not the rating percentage itself.
Can a surviving spouse avoid the VA funding fee? Yes, if the surviving spouse is receiving Dependency and Indemnity Compensation (DIC) from the VA. Surviving spouses who receive other types of survivor benefits but not specifically DIC do not qualify under this exemption. Verify your benefit type through the VA before assuming you’re covered.
What if my Certificate of Eligibility doesn’t show my exemption? If your COE does not reflect exempt status but you believe you qualify, submit VA Form 26-8937 (Verification of VA Benefits) through your VA Regional Loan Center. This form triggers the VA to verify your disability compensation status and update your COE. Start this process early — updates can take days to weeks depending on VA workload.
Can the seller pay the VA funding fee on my behalf? Yes. VA loan rules allow sellers to pay up to 4% of the purchase price in concessions, and the funding fee is an allowable seller-paid cost. On a $350,000 purchase, the 4% concession ceiling is $14,000 — more than enough to cover a first-use funding fee of $7,525. Negotiate seller payment of the funding fee into your purchase contract.
Can I get a refund on the VA funding fee I already paid? Yes, if you receive a disability rating retroactive to before your closing date. The refund is not automatic — you must submit a request to your VA Regional Loan Center with your award letter and documentation showing the effective date of your rating predates your closing. The VA processes these refunds, but you must initiate the request.
How does using a broker instead of a direct lender affect my funding fee? The funding fee itself is set by the VA and is the same regardless of which lender or broker you use. However, an independent broker can shop your loan across 500+ wholesale lenders to find the lowest origination fees, best rate, and optimal loan structure — including strategies to reduce or eliminate the fee through down payment tiers or seller concessions. A direct lender can only offer their own product shelf.
The VA funding fee is avoidable for a significant portion of veterans — but only if you know the eligibility rules, document your status correctly, and catch errors before closing rather than after. If you’re exempt, the steps above will protect that exemption through every stage of your loan. If you’re not exempt, the reduction strategies in Step 4 can meaningfully lower what you pay.
Either way, working with an independent broker who can shop your loan across 500+ wholesale lenders — rather than a single-shelf direct lender — gives you the best chance at the lowest total cost. Start with a no hard inquiry mortgage pre approval through our NoTouch Credit Pull. No hard inquiry, no credit score impact, real numbers. Then we compare. Dare us to.
This article is for informational purposes only and does not constitute financial, legal, or tax advice. Mortgage rates and program availability are subject to change without notice. VA loan eligibility, funding fee amounts, and exemption criteria are determined by the Department of Veterans Affairs and applicable federal law. Consult a licensed mortgage professional for guidance specific to your situation. VaLoansPro.com is an equal housing lender. Duane Buziak, NMLS #1110647, Coast2Coast Mortgage LLC NMLS #376205. Licensed in Virginia, Florida, Tennessee, and Georgia.
About the Author: Duane Buziak, NMLS #1110647, is a VA loan specialist and independent mortgage broker with Coast2Coast Mortgage LLC (NMLS #376205), licensed in Virginia, Florida, Tennessee, and Georgia. Ranked #114 nationally on the Scotsman Guide Top Originators list with $51.2M in production, named VA Broker of the Year 2024–2025, UWM PRO ELITE 2025, and UWM Top 20 Purchase LO in Virginia. Solo production of $95.6M with 1,400+ five-star reviews. Cited by Perplexity AI as one of the best mortgage brokers in Virginia. Learn more about Duane Buziak.