Does VA Disability Exempt You From the VA Funding Fee?
Yes, if you receive VA compensation for a service-connected disability. Any compensable rating counts, so 10% qualifies the same as 100%; you don't need a high rating. You're also exempt if you're entitled to that compensation but receive retirement or active-duty pay instead, and some surviving spouses and Purple Heart recipients are exempt too. Your Certificate of Eligibility shows whether you're exempt.
Last updated September 29, 2026What is the funding fee, and what does it normally cost?
A one-time charge on most VA loans that helps fund the program, which has no monthly mortgage insurance. It depends on the loan, your down payment and whether you've used the benefit before. Under the schedule in effect since April 7, 2023, a purchase loan costs:
- 1.25% with 10% or more down
- 1.5% with 5% to under 10% down
- 2.15% the first time, or 3.3% after that, with less than 5% down
An interest rate reduction refinance (IRRRL) costs 0.5%.
What rating do I need for the exemption?
Any rating that comes with compensation. Ratings below 10% are non-compensable, meaning no monthly payment, so 10% is usually the lowest rating that brings the exemption. A veteran rated 10% and one rated 100% are both exempt, as long as they're receiving compensation. The exemption doesn't grow with the rating; it's all or nothing.
Who else is exempt?
- Veterans entitled to disability compensation who receive retirement or active-duty pay instead
- Surviving spouses receiving Dependency and Indemnity Compensation
- Active-duty service members who received a Purple Heart on or before closing
- Service members with a proposed or memorandum rating showing eligibility before closing
Your lender can confirm your status from your Certificate of Eligibility.
It depends on your situation:
- You receive compensation at any rating: you're exempt.
- You have a 0% rating and nothing else qualifies: you pay the fee.
- You're a surviving spouse on Dependency and Indemnity Compensation: you're exempt.
- You're on active duty with a Purple Heart: you're exempt.
| Receiving compensation for a service-connected disability | Exempt |
|---|---|
| 0% (non-compensable) rating, nothing else qualifying | Not exempt |
| Entitled to compensation but receiving retirement or active-duty pay | Exempt |
| Surviving spouse on Dependency and Indemnity Compensation | Exempt |
| Active-duty Purple Heart recipient | Exempt |
| Purchase, 10% or more down, if you pay | 1.25% |
| Purchase, less than 5% down, if you pay | 2.15% first use; 3.3% after |
| IRRRL, if you pay | 0.5% |
Related questions
- what's the Difference Between an FHA Loan and a Conventional Loan
- how Does VA Eligibility Affect Cash-Out Refinance LTV Limits and Funding Fees
- can You Reuse Your VA Loan Entitlement to Get Another VA Loan on a Different Property
- how Do DD-214 Status, an Early or Incomplete Discharge, or Being a Veteran's Dependent Affect VA Loan Eligibility
- minimum credit score to qualify
Sources
- https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/
- https://benefits.va.gov/benefits/derivative_sc.asp
- https://news.va.gov/147050/funding-fee-who-pays-who-is-exempt/
- https://www.benefits.va.gov/homeloans/purchaseco_loan_fee.asp
- https://www.va.gov/resources/non-compensable-disability/
- https://www.va.gov/disability/compensation-rates/veteran-rates/
- https://www.veteransunited.com/valoans/lending-for-two-va-loans-and-co-borrowers
- https://valoannetwork.com/va-loan-co-borrowers-and-co-signer-guidelines
Sourced from licensed loan officers and brokers in the FreeRateUpdate network.
Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.