Service-Connected and Buying: What the Funding Fee Exemption Actually Covers
Jeanette Spain
21-year Air Force veteran. Central Texas Realtor.
The short answer
Any service-connected disability rating — including 0% — waives the VA funding fee entirely. The exemption should appear on your Certificate of Eligibility. If it doesn't and you have a rating on file with the VA, it needs to be corrected before closing, not after.
Who qualifies for the exemption
- Veterans with any service-connected disability rating, including a 0% rating that is service-connected and in the VA system
- Surviving spouses of veterans who died in service or from a service-connected disability
- Veterans entitled to compensation for a pre-discharge disability
- Active duty service members who have received a Purple Heart
What the fee looks like without the exemption
Loan use
0% down
5–10% down
10%+ down
First use
2.15%
1.5%
1.25%
Subsequent use
3.3%
1.5%
1.25%
On a $450,000 purchase at 2.15%, the fee is $9,675. At 3.3% on a subsequent use, it is $14,850. The exemption eliminates both.
Where the exemption shows on your COE
The Certificate of Eligibility has a field labeled "Funding Fee Exemption." When the VA has a service-connected rating on file, this populates as "Exempt." Your lender pulls the COE through the VA portal when you apply for the loan. A thorough lender checks this line before they quote your loan costs. An inattentive one may miss it.
If your COE shows a funding fee but you have a service-connected rating, do not proceed to closing until the record is corrected. File a request with the VA to update the COE. It takes time. Start it the moment you know there's a discrepancy.
What happens if it's wrong at closing
You pay a fee you didn't owe. The VA does issue refunds for incorrectly collected funding fees, but the process takes months, and the money is tied up in your loan balance or out of pocket in the meantime. Prevention costs nothing. Recovery costs time and frustration. Confirm your exemption status before you make your first offer.
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