VA Loan Questions: VA Funding Fee Exemptions for Disabled Veterans

By
Mortgage and Lending with VALoans.com - Mortgage Banker - RE Agent Trusted Lender

A reader asks, “I was told when I separated from the US Air Force that I was eligible for a VA funding fee refund because I am a 90% disabled vet. Is that true and if so where do I start to get the refund?”

The answer to this particular question depends on where the veteran is with two processes–house hunting and the VA disability claims process. For borrowers who are looking for a home, it’s important to discuss VA loan funding fee exemptions with the lender.

The borrower who already has VA recognition of his or her service-connected disabilities must furnish VA Form 26-8937, Verification of VA Benefits, indicating the borrower’s exempt status. If this verification is not available prior to closing the loan, the borrower is required to pay the VA loan funding fee and apply for a refund once VA Form 26-8937 is available. Ask your lender where to send this form.

The reason for this is simple–the VA loan program does not automatically grant exemptions to the VA loan funding fee–borrowers must be recognized by the VA as an eligible veteran with service connected disabilities. VA loan rules say any veteran currently receiving VA compensation or who is eligible to receive VA compensation for service connected conditions–as recognized by the Department of Veterans Affairs–is eligible for the VA loan funding fee exemption.

For those who can submit VA Form 26-8937 prior to paying the fee, the exemption applies. For those who cannot, the refund of the VA loan funding fee is NOT automatic; it must be applied for.

Discuss this situation with your lender in detail during the application process and/or once you’ve received official notification from the VA of your exempt status. You can also call the Department of Veterans Affairs at 1-800 827-1000.

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  1. The Marcus Rice Team 07/27/2012 04:00 AM
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Topic:
Mortgage / Finance
Location:
Texas
Groups:
Military Relocations
ActiveRain Network Referral Base
Military
Active Rain Newbies
All About Mortgages/Mortgage Networking
Tags:
va loan funding fee exemption
va loan funding fee
va home loan rules
va claims
va disability compensation
va loan benefit
va loans

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Rainmaker
1,103,413
Myrl Jeffcoat
Greater Sacramento Real Estate Agent
GreatWest Realty

I did not know about that funding fee exemption for disabled veterans, Bruce!  I'm curious, not all veterans are considered 100% disabled.  Some are given numbers like 50% or 70% disabled.  Is their a cutoff on the level of disability in order to qualify for the funding fee exemption? 

July 24, 2012 05:01 AM
Rainmaker
408,253
Bruce Reichstein
VA Home Loan Expert +26 yrs - www.VALoans.com
VALoans.com - Mortgage Banker - RE Agent Trusted Lender

VA loan rules say any veteran currently receiving VA compensation or who is eligible to receive VA compensation for service connected conditions–as recognized by the Department of Veterans Affairs–is eligible for the VA loan funding fee exemption. If the veteran gets money from the government for their condition or is approved to start getting VA disability payments, they are eligible.

July 24, 2012 05:28 AM
Rainmaker
263,238
Jay Beckingham
Premier Nationwide Lending

so, the diabled Veteran can acquire 100% financing, with no funding fee, and no monthly MI, that's fantastic, wouldn't you say.

just to be clear I'd like to mention that the VA entitlement to purchase a home is an "earned" benefit, especially for those with service related disabilities

July 24, 2012 05:31 AM
Rainmaker
966,366
Gary L. Waters, Broker Owner Waters Realty of Brevard, LLC
Personal Service, always.
Waters Realty of Brevard, LLC

Interesting. I had no idea about the VA Funding Fee exemption.  The VA Loan program is a great benefit for veterans. Hope it stays available.

July 24, 2012 05:58 AM
Rainmaker
891,596
Michael Setunsky
Your Commercial Real Estate Link to Northern VA
Michael's Commercial LLC

Bruce, good information for our veterans with service-connected disabilities. Thanks for the links.

July 24, 2012 06:41 AM
Ambassador
883,669
Margaret Woda
Maryland Real Estate & Military Relocation
Long & Foster Real Estate, Inc., Crofton, MD 21114

Okay, the buyer can have the VA Funding Fee refunded if they get the form after closing...  But what happens if they financed the VA Funding Fee at closing?

July 24, 2012 08:09 AM
Rainmaker
317,786
Jon Quist
Tucson's BUYERS ONLY Realtor since 1996
LONG REALTY

Good informational post. And Jay is correct to mention that the VA loan is certainly an "earned" benefit. Sure as heck isn't charity!

July 24, 2012 09:10 AM
Ambassador
1,227,260
Erica Ramus
MRE, Schuylkill County PA Real Estate
Erica Ramus - Ramus Realty Group - Pottsville, PA

Great post. This was not even on my radar until I read it. 

July 24, 2012 06:07 PM
Rainmaker
1,103,413
Myrl Jeffcoat
Greater Sacramento Real Estate Agent
GreatWest Realty

Thank you!  That is very helpful!  I know a couple of veterans which this exemption may help!

July 24, 2012 07:22 PM
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Rainmaker
408,253

Bruce Reichstein

VA Home Loan Expert +26 yrs - www.VALoans.com
Expert on Veteran (VA) Home Loans
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