2025 Cost of Living Adjustment for VA Disability – Implications for VA Home Buyers
This year’s cost-of-living adjustment (COLA) is up 2.5%. So if you receive VA disability benefits, you’ll see a little extra in your pocket in 2025.
Living on a fixed income gets tougher as inflation rises, but if you’re planning to buy a home soon, this increase could actually work in your favor. Since VA disability income factors into loan approval, this boost can help you get financially ready for your future purchase.
Check your VA home buying eligibility. Start here (Mar 17th, 2025)What is the 2025 VA disability COLA increase?
The 2025 cost-of-living adjustment (COLA) for VA disability benefits is set at 2.5%, meaning veterans will see a slight increase in their monthly payments. While this isn’t as high as previous years—3.2% in 2024 and a record-breaking 8.7% in 2023—it can still help offset the rising cost of living.
So, what does this increase look like in real numbers? If you have a 10% VA disability rating, you’ll receive about $4.28 more per month. If you’re rated at 100% with no dependents, your monthly benefits will increase by around $93.45.
While this may not seem like much at first, it can add up over time and help cover everyday costs.
VA disability ratings range from 0% to 100% and are based on the severity of service-connected conditions. The higher your rating, the more compensation you receive because the VA recognizes that more severe disabilities can impact your ability to work and earn income.
This increase is especially important if you’re thinking about buying a home. Lenders consider your VA disability income when reviewing your loan application, and even a small increase can improve your debt-to-income ratio, making it easier to qualify.
It can also help when saving for upfront costs like home inspections, appraisals, and moving expenses.
Beyond home buying, this adjustment also helps with everyday inflation from groceries to gas.
How VA disability income impacts VA home loan eligibility
VA disability payments are tax-free, meaning you don’t have to report them on your tax return. But even though they aren’t taxed, VA loan lenders can still count these payments as income when you apply for a mortgage.
Since these benefits are paid by the federal government and often continue for life, they’re a dependable source of income—which is what lenders look for when reviewing loan applications.
This stability can strengthen your mortgage application by improving your debt-to-income (DTI) ratio, which plays a big role in loan approval. And because your VA disability benefits aren’t taxed, that’s more money you can put toward home-related expenses.
So, if you receive $4,000 per month in VA disability benefits, that’s a full $4,000 available for your budget—unlike taxable income, where a portion goes to federal and state taxes. This can make homeownership more affordable.
Key VA loan benefits for disabled veterans
While veterans aren’t required to use a VA loan, this mortgage program offers several benefits that can make homeownership more affordable—especially for those receiving VA disability benefits. One major cost-saving advantage is the VA funding fee.
The VA funding fee is a one-time charge that keeps the loan program running and reduces the cost to taxpayers. This amount depends on factors like your down payment and whether it’s your first VA loan.
For example, if you buy a home with no down payment and it’s your first time using a VA loan, the funding fee is typically 2.15% of the loan amount. On a $250,000 home, that’s an extra $5,375 added to the loan or paid upfront.
However, disabled veterans are exempt from this fee, which saves thousands and allows them to keep more of their cash in reserves.
Another major benefit of VA loans is that they don’t require a down payment or private mortgage insurance (PMI). Normally, buyers who put less than 20% down must pay PMI, which can add hundreds to a monthly mortgage payment.
That extra cost is eliminated with a VA loan, making homeownership more affordable in the long run.
Some states also offer property tax exemptions for disabled veterans. This can significantly reduce annual property tax bills, freeing up more money for other financial priorities.
Check your VA home buying eligibility. Start here (Mar 17th, 2025)Real estate market considerations for VA buyers in 2025
Even with a higher cost-of-living adjustment, veterans still face the same home buying challenges as everyone else—rising home prices, competitive markets, and higher interest rates, all of which make borrowing more expensive.
In a competitive market, where multiple buyers are bidding on the same property, having a higher disability income and COLA increase can give you an edge.
For example, a higher income can improve your DTI ratio, which lenders use to determine loan eligibility. This can result in better loan terms for buyers.
Additionally, with a more stable income, you may qualify for a larger loan amount, which can make it easier to purchase in a high-demand area. Extra cash from the COLA increase can also cover upfront costs like earnest money deposits, making your offers more competitive.
Of course, higher mortgage rates still remain an issue. To help lower your rate, consider buying down the rate by paying discount points. These are upfront fees paid to your lender at closing to lower your mortgage interest rate, reducing your monthly payments over time.
Additionally, other rate reduction tips include improving your credit score, shopping around and comparing VA lenders, and perhaps considering a shorter loan term, like a 15-year mortgage, which usually has a lower rate.
Bottom line
The 2025 VA disability COLA increase helps veterans keep up with rising costs, but home buying challenges like high prices and interest rates remain. Even so, more disability income can strengthen their loan applications, improve affordability, and allow them to make strong offers.
