Can You Get Your VA Funding Fee Refunded? A Step-by-Step Guide
If you’ve recently used a VA-backed mortgage to buy or refinance a home, you’re likely familiar with the VA funding fee that is typically required as part of the loan process.
This fee helps reduce the cost to taxpayers while maintaining the VA loan program. However, there are situations where you can get this fee refunded, and understanding how to go about it can save you money.
Check your VA home buying eligibility. Start here (May 20th, 2025)What is the VA funding fee?
The VA funding fee is a one-time payment made at closing by veterans, active-duty service members, and certain surviving spouses accessing a VA loan. The fee is based on factors like whether you’re a first-time VA loan user, your down payment amount, and whether you’re using the loan for a purchase or refinance.
While the VA funding fee is a necessary part of obtaining a VA loan, it can be refunded under certain circumstances. This fee ranges from 1.4% to 3.6% of the loan amount, depending on your loan type and down payment.
Who is eligible for a VA funding fee refund?
Not everyone can get the VA funding fee refunded. However, there are some circumstances where you may qualify for a refund:
- Disability Exemptions: Veterans who are receiving compensation for a service-connected disability or veterans who are eligible to receive VA compensation for service-connected disability but are receiving retirement or active-duty pay instead.
- Surviving Spouses: Surviving spouses of veterans who died as a result of their service may be eligible for a refund. This is especially relevant if the veteran’s disability rating would have qualified for a funding fee exemption.
- Purple Heart recipients: If you’re a service member or an active duty member who has received the Purple Heart before or on the loan closing date.
- Proposed or Memorandum Rating: Veterans rated as eligible to receive compensation based on a pre-discharge exam or review.
How to apply for a VA funding fee refund
If you believe you qualify for a refund, follow these steps to apply:
- Review Your Loan Closing Documents: Before applying for a refund, check your loan closing documents to verify that you were indeed charged the VA funding fee. The fee should be clearly listed on your closing statement.
- Contact Your Lender: Your first point of contact should be the lender who originated the loan. Explain your situation and confirm that you are eligible for a refund based on your disability status, status as a surviving spouse, or any other qualifying criteria.
- Gather the Necessary Documentation: If your eligibility for a refund is based on a disability rating, you’ll need to provide documentation of your VA disability rating. If you’re the surviving spouse of a veteran, you may need to provide the veteran’s death certificate and proof of service connection.
- Request a Refund Application from the VA: Contact your VA Regional Loan Center at 1-877-827-3702 to get started. The VA has a refund request form (VA Form 26-8937) that needs to be filled out and submitted. If you’re working with your lender, they may assist you in filling out the form.
- Submit Your Request: Once the form is completed, submit it to the VA either directly or through your lender. Keep in mind that the VA may take some time to process your refund request, so be patient.
How long does it take to get a VA funding fee refund?
The time it takes to approve your VA funding fee refund can vary, but generally, it may take several weeks to a few months. Once approved, you can expect to wait up to 10 business days to receive the refund.
How will you receive your VA funding fee refund?
In most cases, veterans eligible for a refund of their VA funding fee will receive it directly from the Department of Veterans Affairs.
Veterans who financed the funding fee through their loan can choose to keep the cash or make a principal-only payment on their loan. Doing so won’t change your monthly mortgage payment, but you could save interest on the life of your loan.
Common VA funding fee refund pitfalls
- Missing the Deadline: If your eligibility is based on disability status, make sure to file for a refund soon after your disability rating is awarded. It’s easier to get the refund if you act quickly.
- Not Keeping Good Records: Always keep records of your VA loan closing documents, VA disability rating paperwork, and any correspondence with your lender or the VA. Having this documentation on hand can speed up the process.
- Tax Implications on a Funding Fee Refund: If you have previously written off the funding fee on your taxes, you’ll have to declare the refund as income on your tax return.
- Ignoring Your Eligibility: Many veterans and surviving spouses don’t realize they may be eligible for a refund. If you meet the criteria, don’t hesitate to apply.
Final thoughts
Getting a VA funding fee refund can be a great way to reduce the cost of your VA loan. If you qualify, it’s worth taking the time to apply for a refund. The process may take some time, but it could provide you with financial relief in the long run.
Remember to review your loan documents, reach out to your lender, and submit the appropriate forms to the VA to start the process. With patience and careful attention to detail, you could be on your way to getting that VA funding fee refunded.
