Who is exempt from the VA funding fee

The funding fee is a charge on most loans that the Department of Veterans Affairs guarantees. It is a percentage of the loan amount, paid once, at closing or added to the loan. It is not monthly mortgage insurance. The percentage depends on the loan type, whether the borrower has used the VA home loan benefit before, and, on a purchase, the down payment. The VA funding fee calculator applies VA’s published table. This page is about the people the table does not apply to.

Who does not pay the fee

VA’s funding-fee page lists these exemptions. A borrower does not pay a funding fee if they:

• receive VA compensation for a service-connected disability;
• are eligible to receive that compensation but receive retirement pay or active-duty pay instead;
• are a surviving spouse of a Veteran and receive Dependency and Indemnity Compensation;
• are a service member who, before closing, received a proposed or memorandum rating saying they are eligible for compensation because of a pre-discharge claim; or
• are on active duty and, on or before the closing date, provide evidence that they received the Purple Heart.

The wording above follows VA’s public list. A lender or VA confirms that a particular file qualifies. This site cannot look up a service record, a disability rating, or a claim. Checking the “exempt” box on the calculator shows the arithmetic of a zero fee. It does not decide the exemption.

What an exemption does not waive

An exemption removes the funding fee. It does not remove the other costs of buying a house. Appraisal, title, recording, prepaid interest, and the lender’s origination charge are separate, and VA has its own rules about which of those a veteran may be charged. Those rules are on the VA closing costs page.

An exemption also does not, by itself, mean the borrower qualifies for a VA loan. Entitlement, occupancy, income, and the property are separate questions. A borrower can be exempt from the fee and still be turned down, and a borrower can qualify for the loan and still owe the fee.

The exemption is about the funding fee on that loan. It is not a refund of a fee already paid on an earlier loan unless VA’s own refund rules say so. Those rules are on VA’s site, not in this calculator.

First use and later use still matter for everyone else

For a borrower who is not exempt, the rate is higher after the benefit has been used before, and it is lower when a purchase has a larger down payment. On a first-use purchase with no down payment, VA’s table charges 2.15%. After a previous VA loan, a small down payment can move the rate. The calculator’s table is the one to read. The exemption, when it applies, replaces that percentage with zero. It does not move the borrower into a cheaper band. There is no fee to put in a band.

Worked example

A first-use purchase of a $400,000 home with no down payment, fee financed. The numbers come from the same function as the VA funding fee calculator.

1. Loan amount before the fee: $400,000 − $0 = $400,000.
2. Not exempt, first use, no down payment: the rate is 2.15%. The fee is $400,000 × 2.15% = $8,600.00.
3. Financed, the total loan is $400,000 + $8,600.00 = $408,600.00. Nothing is due for the fee at closing, and the fee is part of the balance that accrues interest.
4. The same loan marked exempt: the fee is $0.00 and the total loan stays $400,000.

The difference is the entire $8,600.00 fee. On a later-use purchase of the same home with $20,000 down, a borrower who is not exempt would pay 1.5%, or $5,700.00. An exempt borrower on that purchase would still pay $0.00. Down payment and prior use change the fee only when the fee is owed.

How to use the calculator

Enter the price and the down payment, or the loan amount on a refinance. Leave the exempt control off to see the table rate. Turn it on only if VA or the lender has confirmed an exemption on the list above. If the status is unclear, the useful comparison is the one in the example: the full fee beside zero. The cash due at closing for everything else is a different worksheet. The cash to close calculator adds those other amounts. It does not apply VA’s exemption rules.

Rates and the exemption list were taken from VA’s funding-fee page and from 38 U.S.C. § 3729. If this page and those sources disagree, the sources govern. The fee percentages on the calculator carry their own “last verified” date. This article does not move that date.

Sources

• VA: funding fee and loan closing costs
• 38 U.S.C. § 3729, loan fee