The short answer
VA says the funding fee is waived for several groups, including qualifying Veterans receiving service-connected disability compensation, certain Veterans entitled to compensation but receiving retirement or active-duty pay, eligible surviving spouses receiving DIC, service members with a qualifying pre-discharge proposed or memorandum rating before closing, and active-duty Purple Heart recipients who provide evidence by closing. A later disability award may support a refund only when its effective date is retroactive to before the loan closing. Confirm exemption status before closing rather than assuming a refund will be approved later.
For Veterans, active-duty service members, and eligible surviving spouses buying in Plano, McKinney, Frisco, Little Elm, Aubrey, and across North DFW, the VA funding fee can be one of the largest single entries on the Loan Estimate.
It is not the same as private mortgage insurance, property tax, or a lender origination fee. It is a one-time program fee on many VA-backed or VA direct loans. VA says it helps support a loan program that generally does not require a down payment or monthly mortgage insurance.
The key question is not simply, “What percentage applies?” It is, “Has my exemption status been correctly established before closing?”
Who does not have to pay the funding fee?
VA’s page updated October 5, 2026 lists these exemption categories:
- A Veteran receiving VA compensation for a service-connected disability.
- A Veteran eligible to receive service-connected disability compensation but receiving retirement or active-duty pay instead.
- A surviving spouse receiving Dependency and Indemnity Compensation, or DIC.
- A service member who received a proposed or memorandum rating before closing showing eligibility for compensation based on a pre-discharge claim.
- An active-duty member of the Armed Forces who provides evidence by the closing date of receiving a Purple Heart.
Who makes the official determination?
The lender and VA process determine the official status. A disability rating, military record, pending claim, property-tax exemption, and funding-fee exemption are related only when VA rules say they are. Do not substitute one document or benefit for the required determination.
What are the current purchase-loan rates?
VA’s current rate table, shown as effective April 7, 2023 and rechecked October 27, 2026, lists these purchase and construction-loan rates for borrowers who are not exempt:
- Less than 5% down: 2.15% first use; 3.30% after first use.
- 5% or more down: 1.50% first use; 1.50% after first use.
- 10% or more down: 1.25% first use; 1.25% after first use.
How the percentage is applied
The percentage is applied to the loan amount, not the purchase price. Other VA loan types have different rates. The current VA page lists 0.5% for IRRRLs and approved loan assumptions, 1% for manufactured-home loans not permanently affixed, and 2.25% for vendee loans.
Rates and rules can change. Use the live VA table and lender’s calculation for the actual closing.
Pay it at closing or finance it?
VA says an applicable funding fee may be paid in full at closing or included in the loan amount. Financing the fee reduces cash due at closing but increases the amount borrowed and the interest paid over time.
On a VA purchase or construction-permanent loan, VA says the funding fee is the only closing cost that can be financed into the loan amount. Other fees and charges must be paid at closing or handled through permitted credits and contractual allocations.
Ask the lender to show both versions:
- Cash to close if the fee is paid upfront.
- Loan amount, payment, and long-term interest if the fee is financed.
Do not plan to “pay now and refund later”
VA Circular 26-23-19 directs lenders to establish exemption status before closing and use due diligence when information suggests an exemption may apply. It says lenders should not advise borrowers who believe they are exempt to close, pay the fee, and simply request a refund later because refund decisions are individual and cannot be guaranteed.
Before closing:
- Ask what exemption status appears in the VA and lender systems.
- Review the Certificate of Eligibility and any required supporting determination.
- Tell the lender about a pending disability claim or pre-discharge process.
- Ask the lender to refresh or verify the status close to the signing date when appropriate.
- Confirm the funding fee line on the Loan Estimate and Closing Disclosure.
Who keeps the question visible?
Clarissa can help make sure the question stays visible on the transaction checklist, but VA and the lender make the determination.
When can a later award support a refund?
VA says a borrower may be eligible for a funding-fee refund when VA later awards compensation for a service-connected disability and the effective date of that compensation is retroactive to before the loan closing date.
The effective date—not simply the date the award letter arrives—is the critical fact.
VA also states that if a proposed or memorandum rating is received after closing, the borrower still had to pay the fee and is not eligible for a refund based on that post-closing proposed or memorandum rating.
Borrowers who believe they may qualify should contact the VA Regional Loan Center at 877-827-3702. VA’s current contact page lists representatives as available Monday through Friday, 8:00 a.m. to 6:00 p.m. Eastern Time.
A separate 2026 tax development
In February 2026, VA announced that eligible new borrowers can deduct VA funding fees on their taxes when purchasing with a VA-guaranteed loan. That tax treatment is separate from a VA exemption or refund.
Do not treat a possible tax deduction as permission to ignore exemption status or as a promise of a specific tax benefit. Save the Closing Disclosure and funding-fee records and ask a qualified tax professional how the current law applies to the specific tax year and filing situation.
Using your VA benefit in North DFW?
Using your VA benefit to purchase in North DFW? Clarissa can help keep the funding fee, appraisal, contract deadlines, title work, and lender questions organized while VA and the lender make the program determinations. Call or text 469-253-7506 or request a no-pressure strategy call at https://www.clarissasellsitalldfw.com/contact.
Related guides
Frequently asked questions
Is every Veteran exempt from the VA funding fee?
No. Exemption depends on the categories established by VA, including certain service-connected disability compensation, DIC, qualifying pre-discharge ratings, or active-duty Purple Heart evidence. VA and the lender determine the status.
Is a Texas disabled-veteran property-tax exemption the same thing?
No. Texas property-tax exemptions are administered through state law and appraisal districts. The VA funding-fee exemption is a federal VA home-loan determination.
Can I finance the funding fee?
VA says an applicable fee can be included in the loan amount or paid in full at closing. Financing increases the amount borrowed and the interest paid over time.
Can I receive a refund after closing?
Possibly. VA says a later service-connected disability compensation award may support a refund when its effective date is retroactive to before the closing date. Refund eligibility is not guaranteed.
What if my disability claim is pending when I close?
Tell the lender before closing and ask how exemption status is being verified. VA guidance tells lenders not to ignore information that may indicate an exemption and not to rely on a future refund as the plan.
Who should I call about a possible refund?
VA directs borrowers to the Regional Loan Center at 877-827-3702. Use VA’s current contact page to confirm hours and contact options.
Sources
- U.S. Department of Veterans Affairs — VA funding fee and loan closing costs — as of Updated October 5, 2026; rechecked October 27, 2026
- Veterans Benefits Administration — Circular 26-23-19: VA Funding Fee Exemption and Refund Procedures for Lenders — as of Issued October 2, 2023; current circular index rechecked October 27, 2026
- U.S. Department of Veterans Affairs — VA Home Loans contact information — as of Rechecked October 27, 2026
- VA News — Home loan borrowers can now deduct funding fees — as of Published February 18, 2026 and updated February 12, 2026 as shown on the page; rechecked October 27, 2026
General education only, not VA-benefits, lending, legal, accounting, or tax advice. Exemption and refund decisions depend on VA records, effective dates, documentation, loan type, and the specific borrower. Rates and rules may change. Confirm the current fee and status with VA and a qualified VA-approved lender; consult a tax professional about deductibility.