To pay a funding fee, or not to pay a funding fee, that is the question. But can you get a refund on a funding fee you already paid?
The VA funding fee is a one-time payment made by borrowers on VA-guaranteed home loans. It helps offset the government’s costs for the VA Home Loan program. You can pay it in two ways: You can “roll” it into your loan, which adds it to your total loan amount and includes it in your monthly mortgage payment, or you can pay it out of pocket at closing.
Most Veterans and service members must pay the fee, but some are exempt. You don’t have to pay the funding fee if you are:
- Receiving VA compensation for a service-connected disability
- Eligible for VA disability compensation, but receiving retirement or active-duty pay instead
- Receiving Dependency and Indemnity Compensation (D.I.C.) as the surviving spouse of a Veteran
- A service member who has received a proposed or memorandum rating before the loan closing date that says you’re eligible for disability compensation based on a pre-discharge claim
- An active-duty member who, on or before your loan closing date, provides evidence that you received a Purple Heart
If you’ve already paid the fee, whether you can get a refund depends on timing
You may have seen YouTube videos or social media posts claiming that Veterans are entitled to a refund if they receive a service-connected disability rating after closing on their home.
That is not always true.
Receiving a disability rating after closing does not automatically qualify you for a refund. The key is the effective date of your VA disability compensation. To be eligible for a VA funding fee refund, a Veteran must have a disability claim with an effective date that precedes the closing date on their VA loan.
When you are granted disability benefits, VA assigns an effective date to that claim. The effective date is the day you can start getting your disability benefits, and it is generally the latter of the date VA receives your claim or the date your entitlement arose. It is typically not the date you receive a decision. So, if your effective date is earlier than the date you closed on your VA home loan, you may be entitled to have your funding fee reimbursed.
For example, if you close on your home June 15, and VA later grants disability compensation effective June 1 of that same year, you may qualify for a VA funding fee refund. However, if your effective date is July 1 in this scenario, you generally would not qualify for a refund on that loan.
If a Veteran is eligible for a refund, they don’t need to do anything!
VA automatically reviews rating decisions for retroactive effective dates for Veterans with VA loans to determine their eligibility for a funding fee refund and pays the Veteran the funding fee reimbursement directly. If the Veteran feels they were charged the VA funding fee in error, they can either have the lender submit a correction to VA (which will trigger a refund as applicable) or contact VA to initiate the process.
There is a lot of information online, but for accurate information, always rely on official VA sites. Be cautious of social media posts or videos that promise a refund to Veterans simply because they received a disability rating after buying a home. Whether you qualify depends on your eligibility and the dates involved in your case.
For more information, please contact your lender or call a VA home loan representative at 877-827-3702, Monday-Friday, 8:00 a.m. to 6:00 p.m. ET.
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