You’re exempt from the VA funding fee if you receive VA disability compensation, are eligible for it but receive retirement or active-duty pay instead, are a surviving spouse receiving Dependency and Indemnity Compensation (DIC), have a proposed or memorandum rating from a pre-discharge claim before closing, or are on active duty and show proof of a Purple Heart by closing. If you paid the fee and VA later awards compensation with an effective date before your closing, you may qualify for a refund.
Brock Bremmer | U.S. Air Force Reserves Veteran | Real Estate Agent | eXp Realty | San Antonio Metro Area
VA Loan Specialist
Also see: VA Loan Guide for San Antonio | VA Loans on New Construction | Disabled Veteran Property Taxes
What Is the VA Funding Fee?
The VA funding fee is a one-time charge on a VA-backed home loan. VA says it helps lower the program’s cost to taxpayers, since VA loans don’t require a down payment or monthly mortgage insurance. You can pay it at closing or finance it into the loan. On a purchase or construction loan, it’s the only closing cost VA lets you finance.
The fee is a percentage of the loan amount, not the price. These are VA’s rates for purchase and construction loans, effective April 7, 2023, for veterans, active-duty service members, and National Guard and Reserve members:
| Down Payment | First Use | After First Use |
| Less than 5% | 2.15% | 3.3% |
| 5% or more | 1.5% | 1.5% |
| 10% or more | 1.25% | 1.25% |
On a $350,000 new build with no down payment, that’s $7,525 for first use or $11,550 after first use. With 5% down ($17,500), the fee on the $332,500 loan is about $4,988. An exemption removes that charge completely.
Who Is Exempt From the VA Funding Fee?
VA.gov lists five groups that don’t pay the fee:
- Receiving VA compensation: You get VA compensation for a service-connected disability.
- Eligible, but receiving other pay: You’re eligible for VA compensation but receive retirement or active-duty pay instead.
- Surviving spouses on DIC: You receive DIC as the surviving spouse of a veteran.
- Pre-discharge rating: You’re a service member with a proposed or memorandum rating, issued before closing, saying you’re eligible for compensation based on a pre-discharge claim.
- Purple Heart on active duty: You’re on active duty and provide evidence of a Purple Heart on or before closing.
The wording matters. VA ties most of these exemptions to receiving, or being eligible for, compensation, so check what your Certificate of Eligibility shows instead of assuming.
How Does Your Lender Know You’re Exempt?
Your exemption status shows on your Certificate of Eligibility (COE). VA Circular 26-23-19 (October 2, 2023) tells lenders to:
- Confirm exemption status before closing
- Ask you about a pending compensation claim if the COE says “Non-Exempt”
- Request an updated COE before closing if you aren’t on active duty and a claim is pending
The circular says most COEs process right away, but some can take up to 5 business days. It also tells lenders not to advise a veteran who believes they’re exempt to close and request a refund later, because refunds aren’t guaranteed.
If you’re working through a VA claim and buying at the same time, tell your lender early. With a new build, the closing date can move. If the build is close to done, ask your lender to re-check your COE right before closing.
What If You’re on Active Duty With a Pending Claim?
For active-duty service members, the circular says that if a pre-discharge disability claim is pending and the COE shows “Non-Exempt,” the lender should submit VA Form 26-8937, Verification of VA Benefits. VA then checks the claim status and reissues the COE.
The key rule: if you don’t have a proposed or memorandum rating and you close before discharge, you’re not exempt and won’t get a refund. VA says the Benefits Delivery at Discharge (BDD) program accepts pre-discharge claims 180 to 90 days before you leave the military. If you’re separating near JBSA and buying, ask your lender how your claim timing fits your closing date. See buying a new build before your PCS.
Can You Get the VA Funding Fee Refunded?
Sometimes. VA says you may be eligible for a refund if you’re later awarded compensation for a service-connected disability and the compensation’s effective date is before your loan closing date. If you get a proposed or memorandum rating after closing, you still owe the fee and won’t get a refund based on that rating.
If you think you qualify, VA says to call your VA Regional Loan Center. The number is listed on VA’s funding fee page. Under Circular 26-23-19, the lender or servicer starts the refund in VA’s system, and VA sends refunds for fees charged in error directly to the veteran or surviving spouse.
Can a Builder Pay Your VA Funding Fee?
Yes, but it counts against a limit. VA caps seller concessions at 4% of the home’s reasonable value from the Notice of Value, and VA lists credits for the funding fee as a concession. On a $350,000 reasonable value, the cap is $14,000. Ask your lender how a builder incentive will be split between closing costs and concessions. Watch Are New Construction Builder Incentives in San Antonio Actually Worth It in 2026? before you compare offers.
Frequently Asked Questions: VA Funding Fee
Do Reserve and National Guard members pay a different VA funding fee?
No. VA’s current purchase and construction rate chart applies to veterans, active-duty service members, and National Guard and Reserve members: 2.15% first use and 3.3% after first use with less than 5% down.
Can you get a VA funding fee refund after closing?
You may, if VA later awards compensation for a service-connected disability with an effective date before your closing date. A proposed or memorandum rating issued after closing doesn’t qualify. Contact your VA Regional Loan Center.
Ready to Use Your VA Loan in San Antonio?
Brock Bremmer with eXp Realty is a U.S. Air Force Reserves veteran who has helped buyers and sellers close 120+ homes across the San Antonio metro. He helps VA buyers compare new builds, builder incentives, and total closing costs in San Antonio, New Braunfels, and Boerne.
- 📞 Call or text: 210-501-5088
- 📧 Email: [email protected]
- 📅 Schedule a free consultation
Also see: Using Your VA Loan Again | VA IRRRL Refinance | How to Use a VA Loan in San Antonio
Sources: VA, Funding Fee and Closing Costs (exemptions, refunds, rates, concessions; last updated October 5, 2026); VA Circular 26-23-19, VA Funding Fee Exemption Determination and Refunds (October 2, 2023); VA, Pre-Discharge Claims (BDD).