On a $400,000 Richmond-area purchase with no down payment, a first-use VA funding fee at 2.15% adds $8,600 to the loan. An exempt borrower pays $0. Those percentages are set by VA, so confirm them on the VA funding fee page before you rely on them. The exemption is one of the largest savings in the VA loan program, and many eligible veterans never claim it because nobody checked their paperwork.
This guide, written by Duane Buziak, NMLS #1110647, answers the question directly: who is exempt from the VA funding fee, and how do you prove it? Below you’ll find a 2026 exemption chart, the documents lenders need, the payment math on a Richmond-priced home, and a side-by-side against FHA and conventional financing.
- Who Is Exempt From the VA Funding Fee in 2026: The Exemption Chart
- How the VA Funding Fee Is Calculated and Why Exemption Matters
- Worked Example: Funding Fee vs. Exempt on a Richmond Median-Priced Home
- How to Prove Your Exemption: COE, Rating Letters, and Timing
- VA Loan vs. FHA vs. Conventional: Upfront Mortgage Insurance Costs Compared
- Pull One Document Before You Shop for Rates
- VA Funding Fee Exemption: 10 Quick Answers
Who Is Exempt From the VA Funding Fee in 2026: The Exemption Chart
As of 2026, VA recognizes the exemption groups below. Rules and percentages are set by VA and Congress and can change, so verify against the official VA page linked above before you make decisions.
| Exempt Group | Qualifying Condition | Proof Document |
|---|---|---|
| Veterans receiving VA disability compensation | Receiving compensation for a service-connected disability | COE showing funding fee exempt status, or VA benefit summary (award) letter showing a service-connected rating |
| Veterans entitled to compensation but receiving retirement or active duty pay instead | Would receive VA compensation if they were not receiving retirement pay or active duty pay | COE showing exempt status, or a VA rating decision showing entitlement |
| Purple Heart recipients serving on active duty | Still on active duty at the time of closing | COE noting exempt status, plus documentation of the Purple Heart award |
| Surviving spouses | Spouse of a veteran who died in service or from a service-connected disability, and receiving Dependency and Indemnity Compensation (DIC) | COE, plus VA letter confirming DIC eligibility |
| Veterans with a pre-discharge disability rating | A proposed or memorandum rating from VA at closing, based on separation or discharge exam evidence | The rating decision or memorandum rating, and the COE reflecting it |
Notice what is missing. Exemption follows the loan and your documented status, not your rank or branch. Active-duty members and Guard or Reserve members are not automatically exempt, and neither is every veteran. A veteran with no service-connected rating pays the fee like anyone else.
Also note what the chart does not include: a claim you have filed but VA has not yet decided. A pending claim does not count at closing, and that is one of the most common places borrowers lose the exemption.
How the VA Funding Fee Is Calculated and Why Exemption Matters
The funding fee is a one-time charge that helps sustain the VA loan program and keeps it running at no cost to taxpayers. It is a percentage of the base loan amount, and the percentage depends on three variables.
- First use or subsequent use. Borrowers using the benefit again pay a higher percentage than first-time users when putting little or nothing down.
- Down payment tier. VA sets separate percentages for under 5% down, 5% to under 10% down, and 10% or more down. Putting more down lowers the fee.
- Loan type. Purchase loans, interest rate reduction refinance loans (IRRRLs), and cash-out refinances each carry their own percentages.
As of VA’s current table, a first-use, zero-down purchase carries 2.15%, which is the figure used throughout this article. The other tiers are lower or higher depending on the variables above, and VA can revise them, so read the current numbers directly from the VA table rather than from any article, including this one.
Most borrowers finance the fee into the loan instead of paying cash at closing. That keeps closing out-of-pocket lower, but it raises your balance, and you pay interest on that added amount for as long as you hold the loan. An exempt borrower avoids both the fee and the interest on it.
Terms worth knowing
- Funding fee: the one-time VA charge described above.
- Entitlement: the amount of VA benefit available to guarantee your loan.
- First use / subsequent use: whether you have used your VA home loan benefit before.
- Service-connected disability: an injury or illness VA has determined was caused or worsened by military service.
- Certificate of Eligibility (COE): the VA document confirming you qualify for the loan and, importantly here, whether you are funding fee exempt.
Worked Example: Funding Fee vs. Exempt on a Richmond Median-Priced Home
For the price, this example uses a round $400,000 purchase as an illustration, in line with the range for the city of Richmond. Median prices move month to month, so check the current city-level figure through Virginia REALTORS market data or Zillow’s city-level Richmond page before you plan around it. The rate below, 6.5% on a 30-year fixed, is illustrative and not a quote. For the actual rate environment, see the weekly Freddie Mac Primary Mortgage Market Survey.
Both borrowers are first-use, zero-down, buying the same house.
| Line Item | Non-Exempt Borrower | Exempt Borrower |
|---|---|---|
| Base loan | $400,000 | $400,000 |
| Funding fee (2.15% vs. exempt) | $8,600 | $0 |
| Financed loan total | $408,600 | $400,000 |
| Monthly principal and interest (6.5%, 30 years) | $2,582.64 | $2,528.28 |
| Monthly difference | $54.36 more for the non-exempt borrower | |
| Total paid over 360 payments | $929,750 | $910,181 |
| Lifetime cost of the financed fee | $19,569 ($8,600 principal plus about $10,969 interest) | $0 |
Here is the math step by step. At 6.5% over 30 years, each $1 borrowed costs about $0.0063207 per month. Multiply that by $400,000 and you get $2,528.28. Multiply it by $408,600 and you get $2,582.64. The $54.36 gap, repeated for 360 months, comes to about $19,569. The fee looks like $8,600 on paper, but financed at this rate it costs more than double that if you keep the loan to term.
One more point that surprises buyers: the 2026 conforming loan limit of $832,750, published by FHFA, is not a cap for VA borrowers with full entitlement. Lenders still underwrite income and credit, but VA does not impose a loan limit on those borrowers. Confirm your entitlement status with VA.
How to Prove Your Exemption: COE, Rating Letters, and Timing
A lender cannot waive the fee on your say-so. The exemption has to appear in your VA paperwork. Work through it in this order:
- Request your COE through your VA.gov account (or through your lender). The COE states whether you are exempt from the funding fee.
- Download your VA benefit summary letter, often called the award letter, from VA.gov. It shows your combined service-connected disability rating and confirms you receive compensation.
- Send both to your loan officer before you write an offer. The fee changes your payment and your budget, so you want the answer early.
- Confirm the exemption appears on the Loan Estimate and closing disclosure as a $0 funding fee.
Duane Buziak reviews these documents at the start of the process. The first step is a soft-pull pre-approval using the NoTouch Credit Pull, so you can see where you stand without a hard inquiry while the paperwork is sorted out.
Timing scenarios
If VA grants your rating after closing and the effective date reaches back before your closing date, you may be entitled to a funding fee refund. VA sets the refund rules and process, so check the current instructions on va.gov and gather your decision letter promptly. The reverse mistake is more costly: assuming a pending claim will save you. If the decision has not been issued at closing, you pay the fee.
The retirement pay trap
Retired military status alone does not make you exempt. But if you waive part of your retirement pay to receive VA disability compensation, or would be entitled to compensation except for receiving retirement pay, you may qualify. Many retirees never ask, so bring your retirement and VA letters together for review.
VA Loan vs. FHA vs. Conventional: Upfront Mortgage Insurance Costs Compared
The funding fee is the VA program’s version of mortgage insurance cost, and it is easiest to judge next to the alternatives. The table reflects general program structures as of 2026. Details vary by borrower and lender, so verify FHA figures at hud.gov and conventional PMI rules at fanniemae.com.
| Feature | VA Loan (Fee-Paying) | VA Loan (Exempt) | FHA Loan | Conventional Loan |
|---|---|---|---|---|
| Minimum down payment | 0% for eligible borrowers with full entitlement | 0% | 3.5% with qualifying credit | As low as 3% on some programs, 5% or more is common |
| Upfront cost | Funding fee (2.15% for first-use, zero-down purchase) | $0 | Upfront MIP of 1.75% as of last check | None, though PMI may be charged |
| Ongoing mortgage insurance | None | None | Annual MIP paid monthly | Monthly PMI until enough equity is reached |
| Credit and DTI flexibility | Flexible; lenders set their own credit standards | Flexible | Flexible on credit | Stricter pricing tied to credit score and down payment |
The key difference is recurrence. VA loans carry no monthly mortgage insurance, while FHA MIP and conventional PMI keep charging every month, sometimes for years. That is why an exempt VA borrower usually has the lowest insurance cost of the four columns, and a fee-paying VA borrower often still comes out ahead over time on a low-down purchase.
Usually is not always. A buyer with 20% down and strong credit may find conventional financing competitive. That is where a Dare to Compare side-by-side helps: Duane Buziak can run the same purchase through VA, FHA, and conventional structures using hundreds of wholesale lenders, so you see actual payments in one place rather than guessing.
Pull One Document Before You Shop for Rates
An exemption can save thousands of dollars, and the only thing separating you from it may be a document you can download in a few minutes. Pull your COE or your VA benefit summary letter first. Then look at whether your status matches a row in the chart above.
Whether you’re a veteran ready to use your hard-earned benefits or a homebuyer exploring your financing options, your path to homeownership starts with expert guidance you can trust. Connect with Duane today for a personalized consultation and discover the mortgage solution tailored to your unique goals in the Stafford County and Richmond area. You can also call Richmond Home Loans by Duane Buziak at (804) 212-8663 to confirm your exemption status and run the numbers, starting with a NoTouch Credit Pull.
VA Funding Fee Exemption: 10 Quick Answers
Who is exempt from the VA funding fee?
Veterans receiving VA compensation for a service-connected disability are exempt, along with several other groups: those entitled to compensation but receiving retirement pay, active-duty Purple Heart recipients, qualifying surviving spouses receiving DIC, and veterans with a pre-discharge disability rating.
How do I prove I am exempt from the VA funding fee?
Your Certificate of Eligibility shows funding fee exempt status, and your VA benefit summary letter shows your service-connected rating.
Are all veterans exempt from the VA funding fee?
No, only veterans and spouses who meet a specific exemption category are exempt.
Are active-duty service members exempt from the VA funding fee?
No, active-duty status alone does not qualify, though an active-duty Purple Heart recipient is exempt.
Does a 10% VA disability rating exempt me from the funding fee?
Yes, receiving VA compensation for a service-connected disability qualifies you, and VA does not set a minimum rating percentage for the exemption.
Does a pending VA disability claim count at closing?
No, a claim that has not been decided does not exempt you, although a pre-discharge rating decision may.
Can I get a funding fee refund if my rating comes after closing?
Possibly, if VA grants a rating with an effective date reaching back before your closing, so check the current refund rules on va.gov.
Are military retirees exempt from the VA funding fee?
Not automatically, but a retiree who waives retirement pay to receive VA compensation, or who is entitled to compensation, may qualify.
Does the VA funding fee apply to refinances?
Yes, VA charges a funding fee on IRRRLs and cash-out refinances unless you are exempt, and the percentages differ from purchase loans.
Is there a VA loan limit for funding fee exempt borrowers in 2026?
No, borrowers with full entitlement have no VA loan limit, and the $832,750 conforming limit set by FHFA is not a cap for them.
This information is not intended to be an indication of loan qualification, loan approval or commitment to lend.
About the author: Duane Buziak, NMLS #1110647, is a Scotsman Guide Top Originator for 2025 and 2026, VA Broker of the Year 2024-2025, and UWM PRO ELITE 2025. He is in the Top 1% Nationwide, with $95.6M in verified solo production and more than 1,400 five-star reviews.
Duane Buziak NMLS #1110647, Coast2Coast Mortgage LLC NMLS #376205. Licensed in VA, FL, TN, GA, DC, NC, SC and MD. Equal Housing Opportunity. Rates, terms, and program rules are subject to change without notice. Verify your NMLS license status at the NMLS Consumer Access website.
Duane Buziak, Mortgage Maestro | NMLS: 1110647 | Licensed in VA · FL · TN · GA | UWM PRO ELITE 2025 | Scotsman Guide Top Originator 2025 & 2026 | VA Broker of the Year 2024-2025 | Top 1% Nationwide | Coast2Coast Mortgage | DuaneBuziakMortgageMaestro.com | duane@coast2coastml.com | (804) 212-8663