Does VA Disability Exempt You From the VA Funding Fee?
Yes, if you receive VA compensation for a service-connected disability rated at least 10 percent, you are exempt from the VA funding fee on a VA-backed home loan, and you do not need a higher rating such as 50, 90, or 100 percent to qualify. Some surviving spouses and Purple Heart recipients can also qualify. Your Certificate of Eligibility is the definitive proof of your exempt status.
Last updated July 22, 2026What is the VA funding fee, and how much does it normally cost?
The VA funding fee is a one-time charge on most VA-backed loans. It helps support the VA loan program, which does not require monthly mortgage insurance. The amount depends on the loan type, your down payment, and whether you have used your VA loan benefit before.
On a typical VA purchase loan (as of the 2026-07 VA fee schedule), the fee commonly works out to:
- About 1.25% with a down payment of 10% or more
- About 1.5% with a down payment of 5% to 9.99%
- About 2.15% (first use) to 3.3% (subsequent use) with a down payment under 5%
A VA Interest Rate Reduction Refinance Loan (IRRRL, a streamline refinance for existing VA loans) is typically much lower, around 0.5%. These are general ranges, and your loan officer can confirm the exact figure for your loan.
What disability rating do you need to qualify for the exemption?
You generally qualify once you are receiving VA compensation for a service-connected disability, and a partial rating is enough. VA ratings below 10 percent are considered "non-compensable," meaning no monthly payment is made, so 10 percent is typically the lowest rating that comes with compensation and, with it, the funding fee exemption. A veteran with a 10 percent rating and a veteran with a 100 percent rating are both exempt, as long as they are receiving compensation for the rating.
You can also qualify if you are entitled to disability compensation but instead receive retirement or active duty pay in its place. This exemption is typically documented on your VA disability award letter or your Certificate of Eligibility, which will show your exempt status directly.
Why do people assume you need a much higher rating?
This is a common misunderstanding. Higher disability ratings come with larger monthly compensation and additional benefits, so borrowers sometimes assume the funding fee exemption scales the same way. It does not. The exemption is an all or nothing benefit tied to receiving any compensable disability rating, not a benefit reserved for higher percentages.
Are there other ways to qualify for the exemption?
Yes. Besides veterans receiving compensation for a service-connected disability, other groups can also be exempt, including certain surviving spouses receiving Dependency and Indemnity Compensation (DIC) and some Purple Heart recipients on active duty. Your lender or the VA can confirm your specific exempt status based on your Certificate of Eligibility.
Who else qualifies for a VA loan in the first place?
VA loan benefits generally require the veteran, or an eligible surviving spouse, to be the primary borrower on the loan, and the property being financed needs to be used as a primary residence rather than a vacation home or investment property. A non-veteran co-borrower may sometimes be added, but this can change how the loan is structured. A licensed loan officer can review your specific eligibility and co-borrower situation before you move forward.
| Receiving VA compensation for a service-connected disability (any compensable rating, generally 10% or higher) | Exempt |
|---|---|
| 0% (non-compensable) rating, no other qualifying status | Not exempt |
| Entitled to compensation but receiving retirement or active duty pay instead | Exempt |
| Surviving spouse receiving DIC | May be exempt |
| Purple Heart recipient (active duty) | May be exempt |
| Purchase fee, 10%+ down (if the fee applies) | About 1.25% of the loan amount |
| Purchase fee, 5% to 9.99% down (if the fee applies) | About 1.5% of the loan amount |
| Purchase fee, under 5% down (if the fee applies) | About 2.15% (first use) to 3.3% (subsequent use) |
| IRRRL streamline refinance (if the fee applies) | About 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
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.