va home loan Most Veterans know that one of the most valuable benefits of serving in uniform is a VA backed home loan. A VA loan typically has a lower interest rate than a conventional mortgage, allows for a higher debt-to-income ratio and a lower credit score, and it doesn’t require private mortgage insurance.

What many Veterans don’t know is that by law the VA must charge a “funding fee” of 1.25% to 2.4% which is used to offset the cost of offering the favorable terms of these loans. In general, the lower the down payment percentage, the higher the funding fee percentage.

But you may not have to pay the funding fee. The says “[y]ou won’t have to pay a VA funding fee if any of these descriptions are true for you:

  • You’re receiving VA compensation for a service-connected disability, or
  • You’re eligible to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead, or
  • You’re receiving Dependency and Indemnity Compensation (DIC) as the surviving spouse of a Veteran, or
  • You’re a service member who has received a proposed or memorandum rating before the loan closing date that says you’re eligible to get compensation because of a pre-discharge claim, or
  • You’re a service member on active duty who, before or on the loan closing date, provides evidence of having received the Purple Heart.”

“You may be eligible for a refund of the VA funding fee if you’re later awarded VA compensation for a service-connected disability. " the VA adds. "The effective date of your VA compensation must be retroactive to before the date of your loan closing.” 

VA Home Loan transactions are all handled through VA approved lenders and banks. They handle the entire process which includes the funding fee aspect. When applying for a VA home loan, always notify the mortgage company or bank that you are receiving VA disability. They can always call VA to verify as well.

Are you a disabled veteran? 

There is no better way to learn about your benefits than by downloading your free copy of The Essential Guide to VA Disability Claims. Simply fill out the form and download! 

Sean D. Cuddigan
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SSA and VA Disability Attorney in Omaha, Nebraska
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