VA Funding Fee Exemptions: How Disabled Veterans Save Thousands on Their Florida Home Loan

Author: Carl Hendrix

Published: October 19, 2026

Category: VA Loan Benefits & Florida Real Estate

Read Time: 10 Minutes

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Introduction

When Florida veterans buy a home with a VA loan, two words come up in every conversation: $0 down [1]. But there's a second benefit that too many disabled veterans never hear about — and it can save you thousands of dollars at the closing table: the VA funding fee exemption.

The VA funding fee is a one-time fee charged on most VA loans [2]. For many buyers it gets quietly rolled into the loan amount, where it accrues interest for 30 years. But if you receive VA disability compensation — or fall into one of a few other categories — you don't pay it at all.

Whether you're stationed at MacDill Air Force Base in Tampa, Naval Air Station Jacksonville, Eglin Air Force Base in the Panhandle, Patrick Space Force Base on the Space Coast, or putting down roots as a civilian in Orlando, Lake Mary, or Kissimmee, here's exactly who qualifies for the exemption, how it's verified, and what to do if your disability rating comes through after closing.

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What Is the VA Funding Fee?

The VA funding fee is a one-time payment on a VA-backed home loan. It helps keep the VA loan program running for U.S. taxpayers, since VA loans require no down payment and no monthly mortgage insurance [2].

You can pay the fee in cash at closing, or — as most buyers do — finance it into the loan amount. On a purchase loan, the funding fee is the only closing cost you're allowed to roll into the loan [2].

Current VA Funding Fee Rates (Purchase & Construction Loans)

Down Payment	First-Time Use	Subsequent Use
Less than 5%	2.15%	3.3%
5% or more	1.5%	1.5%
10% or more	1.25%	1.25%

Source: VA funding fee rate charts, effective April 7, 2023 [2]. Other loan types differ — IRRRL refinances are 0.5%, and VA loan assumptions are 0.5%.

On a $400,000 purchase with $0 down and first-time use, that's $8,600 — real money, whether you pay it at closing or finance it for three decades.

What is a VA Loan? Complete Guide for Florida Veterans

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1. Veterans Receiving VA Disability Compensation

This is the big one — and the most commonly missed.

You are exempt from the VA funding fee if you are receiving VA compensation for a service-connected disability [2]. There is no minimum rating threshold in the VA's rule. If VA pays you monthly compensation for a service-connected condition, the fee is waived.

This surprises a lot of veterans, because there's a persistent myth that you need a 100% rating to get VA fee breaks. For the funding fee, any compensable service-connected rating qualifies.

• Applies at closing: Your exemption status is determined based on your situation at the time the loan closes.
• Covers every future use: The exemption isn't one-and-done. Every VA loan you close while receiving compensation is exempt — including subsequent-use loans, where the fee would otherwise jump to 3.3%.

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2. Veterans Eligible for Compensation but Receiving Military Pay Instead

Some veterans are rated as eligible for VA disability compensation but don't actually receive the monthly checks — because they're receiving military retirement pay or active-duty pay instead.

You are still exempt. The VA's rule covers veterans who are eligible to receive compensation for a service-connected disability but receive retirement or active-duty pay in its place [2].

If this describes you, your lender verifies the eligibility — not the payment — so don't assume you owe the fee just because no VA check hits your bank account.

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3. Surviving Spouses Receiving DIC

The exemption extends to military families. A surviving spouse of a veteran is exempt from the funding fee when receiving Dependency and Indemnity Compensation (DIC) [2].

This is one more way the VA loan benefit honors a family's sacrifice — the same benefit that let their veteran buy with $0 down carries forward without the fee.

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4. Service Members with a Pre-Discharge Proposed Rating

If you're still in uniform and going through the VA's pre-discharge disability claim process, timing matters.

You are exempt if, before your loan closing date, you received a proposed or memorandum rating stating you're eligible for compensation as a result of a pre-discharge claim [2].

The key word is before. The rating must exist prior to closing day — which leads directly to the next section, because this is where veterans leave money on the table.

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5. Active-Duty Purple Heart Recipients

Active-duty service members who provide evidence — on or before the loan closing date — that they received the Purple Heart are exempt from the funding fee [2].

If you earned the Purple Heart and you're buying while on active duty, make sure your lender has that documentation before closing. It's a straightforward exemption, but only if the evidence is in the file on time.

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How Your Lender Verifies Your Exemption

You don't just tell your lender you're exempt — it's verified with the VA. Lenders confirm funding fee exemption status through the VA's systems, typically using VA Form 26-8937 (Verification of VA Benefits) [3].

What this means for you in practice:

• Have your VA disability award letter handy. It's the fastest way to document your status.
• Tell your lender up front. Exemption status affects your Loan Estimate and your cash-to-close figures from day one — a good loan officer factors it in before you ever get to the closing table.
• Don't wait until closing week. Verification takes time. Flagging your status early keeps the file moving.

To run your own numbers with or without the fee, use our interactive VA Mortgage Calculator.

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What If Your Disability Rating Comes After Closing?

This happens more than you'd think: a veteran closes on a home, pays (or finances) the funding fee, and months later VA grants a disability claim with an effective date before the closing date.

You may be eligible for a refund of the funding fee [2]. The VA's rule is clear: if you're later awarded VA compensation for a service-connected disability and the effective date of that compensation is retroactive to before your loan closing date, the fee can come back to you.

Two critical details:

• The effective date is everything. It's the date VA says your disability began — not the date the decision letter arrived. If that effective date predates your closing, you're in refund territory.
• A proposed rating issued after closing doesn't qualify. If your pre-discharge rating comes through after the loan closed, the fee stands — no refund on that basis [2].

If you think you're owed a refund, call your VA Regional Loan Center at 1-877-827-3702 (TTY: 711), Monday through Friday, 8:00 a.m. to 6:00 p.m. ET [2].

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Real-World Savings Example ($400,000 Home in Tampa, FL)

Consider a veteran buying a $400,000 home in Tampa with $0 down, using the VA loan for the first time:

• Purchase Price: $400,000
• VA Funding Fee (2.15%, first use, $0 down): $8,600
• Fee Owed with Exemption: $0

If the fee is financed (the most common choice), that $8,600 doesn't just cost $8,600. At an illustrative 6.5% over 30 years, it adds roughly $54/month to the payment — about $19,500 in total payments over the life of the loan.

The exemption wipes all of it out: no $8,600 at closing, no $54/month, no $19,500 over 30 years. And for a veteran on a second VA loan, the math is even better — the subsequent-use fee at $0 down is 3.3%, or $13,200 on the same home.

Figures are illustrative. Your actual savings depend on your loan amount, fee percentage, and interest rate.

For context on how exemptions like this stack with Florida's property tax relief for disabled veterans, see our guide on Florida Property Tax Exemptions for Disabled Veterans.

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How to Claim Your Funding Fee Exemption: Step by Step

1. Confirm your status. Are you receiving VA disability compensation, eligible but receiving military pay instead, a DIC-receiving surviving spouse, holding a pre-discharge proposed rating, or an active-duty Purple Heart recipient? If yes, you're exempt.
2. Gather your documentation. Your VA disability award letter is the gold standard. Purple Heart recipients: have your award documentation ready.
3. Tell your lender immediately — not at closing. Your loan officer needs your exemption status before the Loan Estimate goes out, because it changes your cash-to-close and your loan amount.
4. Let the lender verify with VA. Your lender will confirm exemption status through VA's systems (typically VA Form 26-8937) [3].
5. Review your Closing Disclosure. Before you sign, confirm the funding fee line shows $0. Mistakes happen — usually when the exemption was never flagged early.
6. Closed already and got rated later? If your compensation's effective date predates your closing, call the VA Regional Loan Center at 1-877-827-3702 about a refund [2].

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Frequently Asked Questions (FAQ)

1. Do I need a 100% disability rating to be exempt from the VA funding fee?

No. The VA's exemption applies if you're receiving compensation for a service-connected disability — there is no minimum rating percentage in the rule [2]. (The 100% threshold you're thinking of likely comes from Florida's property tax exemption, which is a separate state benefit.)

2. Does the exemption apply every time I use my VA loan benefit?

Yes. As long as you meet one of the exemption criteria at the time each loan closes, the fee is waived — including on subsequent-use loans where the fee would otherwise be 3.3% [2].

3. I'm exempt from the funding fee — does that mean $0 cash to close?

Not necessarily. The exemption wipes out the funding fee, but you'll still have other closing costs — appraisal, title, insurance, recording fees, and the like. $0 down doesn't automatically mean zero cash to close, so review your Loan Estimate carefully.

4. Can the seller pay my funding fee if I'm not exempt?

A seller can offer credits toward your closing costs, but seller concessions are capped at 4% of the home's reasonable value — and VA specifically counts credits for the funding fee as a concession [2].

5. I paid the funding fee last year and just got my disability rating. Can I get it back?

Maybe — it hinges on the effective date of your VA compensation. If VA made it retroactive to before your closing date, you may be eligible for a refund. Call the VA Regional Loan Center at 1-877-827-3702 [2].

6. How do I get pre-approved for a VA loan in Florida?

Getting started is simple. You can run your numbers on our VA Mortgage Calculator, read the answers on our FAQ page, or speak directly with Carl Hendrix by visiting our contact page or calling (407) 234-5371.

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Ready to Secure Your Florida Dream Home?

Navigating VA loan benefits, funding fee exemptions, and Florida real estate can feel overwhelming, but you don't have to do it alone. As Florida's dedicated VA mortgage specialist at Edge Home Finance, Carl Hendrix has helped thousands of veterans keep more of their money — with zero down payment and expert guidance — since 1996.

Ready to get started?

• Get Pre-Approved for a VA Loan
• Calculate Your Monthly Payment
• Learn More About VA Benefits

Disclaimer: This article is for informational purposes only and does not constitute legal, tax, or financial advice. VA funding fee rules and exemption qualifications are subject to change. Consult with your lender and the Department of Veterans Affairs for guidance specific to your situation.

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References

1. Department of Veterans Affairs. "VA Home Loan Guaranty Buyer's Guide." Available online: https://www.va.gov/housing-assistance/home-loans/
2. Department of Veterans Affairs. "VA funding fee and loan closing costs." Rate charts effective April 7, 2023. Available online: https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/
3. Department of Veterans Affairs. "VA Form 26-8937, Verification of VA Benefits."
4. 38 U.S.C. § 3729(c) — VA loan fee exemption statute.