Are you a U.S. veteran, who would like to own a home? Did you know you the VA Loan Program can help you achieve this goal? VA loans are a no down payment program that, generally, has more lenient credit and income requirements. Plus, the VA controls how much you’ll pay in loan costs and fees. However, this loan program does have one unique cost: the VA funding fee.  

The VA funding fee is a set fee that’s applied to every VA loan. For a first-time home buyer, the fee is a little over 2%. For a second-time buyer, it’s just above 3%. Regular military members pay a slightly lower fee than Reservists and National Guard members. The fee goes directly to the VA to self-fund the loan program for future generations of military home buyers.

However, some home buyers are exempt from pay the fee, while others are eligible to receive a refund after closing.

Why Do Some VA Loan Borrowers Receive a Funding Fee Exemption?

Veterans and military members who receive disability compensation for service-related medical issues, or are entitled to receive disability compensation, are exempt from paying the funding fee on a VA home loan. Additionally, surviving spouses of veterans who died in the service, or from service-related disabilities, are also exempt.

To find out if you’re exempt from paying the funding fee, you can look at your Certificate of Eligibility (COE), which should note it. During your VA loan process, your lender will also verify your funding fee exemption status.

What Do You Do if You Have a Pending Disability Claim or File for a Rating After Closing?

In you have a pending disability claim, you should have your lender tell the VA that you believe you should be exempt from the funding fee. However, it’s very likely the VA will tell your lender to proceed with your loan as if you’re not exempt. Therefore, you will have to pay the funding fee. But you can ask to have the VA evaluate your situation and determine if you should receive a refund.

If appropriate, the VA will offer a funding fee refund if:

1. You are found to be exempt and you paid the fee at closing, or
2. A miscalculation was done, causing you to overpay the amount of your fee.

What Do You Do if You File for a Disability Rating After Closing?

 If after your VA loan closing date, you determine:

1. You’re entitled to disability income;
2. Your disability date is retroactive to a date before your loan closing date; and
3. You paid a VA funding fee;

You may be eligible for a refund. Contact your lender or your nearest VA Regional Loan Center for information.

How Do You Receive Your Funding Fee Refund?

If you paid for your funding fee with cash at closing, you’ll receive a cash refund. If you rolled your fee into your loan, your lender can apply your overpayment to your loan balance.

How Do I Find Out More Information on VA Loans?

If you’re a military member or a veteran living in the Indianapolis metro area, and you would like more information about VA loans, contact the mortgage experts at Grandview Lending. Our experienced mortgage specialists will happily answer any questions you may have.

Additionally, our mortgage professionals can help you get prequalified for your VA loan and walk you through the loan approval process. If you think you may qualify for a funding fee exemption, let them know and they can work with your lender to determine your eligibility status.

Start the process toward homeownership today by calling Grandview Lending at 1-866-690-4920. You’ll be glad you did!

Photo credit: 123RF / Olag Dudko