Servicemembers and veterans who’ve bought homes using VA-backed mortgages are familiar with the loan’s fee structure … but until recently, they may not have been familiar enough.
The wide majority of VA-backed home loans come with a flat percentage fee, which can be as high as 3.3% for a second or subsequent VA loan or as low as 1.25% for some veterans with down payments of 10% or higher (even lower for some refinance options or other loan types); get the full chart here.
But some beneficiaries can have the fee waived. Borrowers who fall into one of these three categories don’t have to pay the funding fee regardless of loan type, per the VA website:
- Those receiving VA compensation for a service-connected disability.
- Those who qualify for such compensation but who aren’t receiving it because they’re getting retirement or active duty pay.
- Surviving spouses of veterans who died in service, or from a service-connected disability.
These rules aren’t new, but they’ve come under scrutiny lately. On May 16, VA officials announced plans to update both the department's certificate of home loan eligibility – a critical part of the VA home loan process – and its disability compensation award letter so they'd notify any recipients who qualify for a funding fee waiver.
The move allows the department “to better inform Veterans through key communications when the law allows VA to waive the fee for a Veteran,” VA Secretary Robert Wilkie said in the announcement.
The announcement also noted a complex part of the loan process that could lead some borrowers to claim fee refunds – those “who, after loan closing, were awarded disability compensation with retroactive effective dates.”
It’s unclear whether all such veterans would be eligible for refunds, but VA has provided between $75 and $100 million in yearly refunds, on average, since 2014, per the release.
If you believe you may be entitled to a funding fee refund, contact your lender or call a VA Regional Loan Center at 877-827-3702 for more information.