Who does not pay the VA funding fee on a home purchase?
Most VA buyers pay it. A short list of buyers does not, and a pending disability claim is the reason many people ask which list they are on.
VA describes the funding fee as a one-time payment on a VA-backed or VA direct home loan, and says you will pay it on a purchase unless you meet certain requirements. Federal law, 38 U.S.C. 3729(c), and VA’s funding fee page line up on who is exempt. These are the groups that come up most when a claim is pending:
- A veteran receiving VA compensation for a service-connected disability.
- A veteran who would be entitled to that compensation but receives retirement or active-duty pay instead.
- An active-duty service member rated eligible for compensation through a pre-discharge claim. VA’s page says the proposed or memorandum rating has to come before the loan closing date.
A claim you filed but VA has not decided is not on that list. Until the rating comes through, ask your lender to show your numbers with the fee included.
That matters in a New Braunfels budget. Federal law sets the fee as a percentage of the loan amount, and the percentage depends on things like whether you have used the benefit before and how much you put down. Ask your lender for your actual figure on your actual loan, then put it next to the rest of your buyer closing costs. I would rather you see the full number early than be surprised by it on the Closing Disclosure.
What happens if your disability claim is still pending at closing?
You pay the fee at closing, and a refund may come later if the award reaches back far enough.
VA’s funding fee page says you may be eligible for a refund if you are later awarded VA compensation for a service-connected disability, and that the effective date of that compensation must be retroactive to before the date of your loan closing. The VA Inspector General’s 2025 audit describes the same rule. Veterans who get a disability determination with an effective date before their loan closing date are entitled to a refund of a funding fee they already paid.
Watch the effective date. A decision that comes months after closing can still qualify if its effective date lands before closing day. One with an effective date after closing does not. When VA’s decision reaches you, look for the effective date before anything else, and ask VA if you cannot find it. If that date falls before your closing date, keep the decision with your closing papers.
Active-duty buyers have a stricter rule. VA’s page says that if you get a proposed or memorandum rating after your loan closing date, you still pay the funding fee and you will not be eligible for a refund based on that rating. VA’s 2023 lender circular says the same about a proposed or memorandum rating that comes after closing.
So there are two scenarios. Either the exemption is in place before closing, or you pay the fee and may get it back later, depending on dates you do not control. Talk with your lender about how each scenario changes your cash to close, and don’t count on a refund until VA has issued it.
How do you confirm your funding fee status before closing?
Ask your lender early, and ask them to check it again before closing. Getting the status right before closing is far easier than chasing a refund later.
VA’s 2023 lender circular says the funding fee exemption status should be established before closing, and that lenders are to exercise due diligence in deciding whether an exemption applies at closing. The Inspector General’s audit describes lenders’ job the same way. Lenders are responsible for checking the exemption status and exercising due diligence on it.
So make the status a standing question in your file, not a last-week surprise. Your lender is the one who checks it, and you are the one who knows a claim is open.
Here is what I would put on your list once you are under contract in New Braunfels. None of it takes long, and it keeps the question in front of the people who can answer it:
- Tell your lender in writing that you have a claim pending, and give the date you filed it.
- Ask what funding fee status your lender sees for you today, and where it shows.
- Ask the lender to check that status again shortly before closing.
- If you are on active duty with a pre-discharge claim, ask whether a proposed or memorandum rating has been issued, and who can check.
- Look at the funding fee line on your Closing Disclosure and ask about it if it does not match the status you were told.
If anyone suggests you close now and sort out the exemption later with a refund, ask them to check the status first. A refund depends on dates that nobody can promise you.
Should you close now or wait for the rating?
That is your call and your lender’s, and it depends on the contract dates and your budget more than anything else.
Your purchase contract has deadlines, and a VA decision does not follow them. You don’t control when a rating arrives, so the parts you can plan are your budget and your dates. If you wait, you are betting a rating arrives before closing. If you close on time without the exemption, you pay the fee. For most buyers with a pending claim, a refund stays possible if the award’s effective date lands before closing. For an active-duty buyer with a pre-discharge claim, VA says a proposed or memorandum rating that comes after closing does not bring a refund, so the timing decision matters more.
A few ways to think it through:
- The size of the fee. Your lender can show you the dollar amount on your loan, and that number is what you are weighing against a delay.
- How you plan to pay it. Ask your lender to show the payment and the cash to close both ways before you decide anything about timing.
- What you can verify. Your current exemption status can be checked today. A future effective date can’t, so don’t build the plan on one.
If the home is already under contract, talk to your lender before you ask the seller for any extension. Ask what a later closing date would mean for your rate lock, your appraisal and the rest of your loan file, and plan your move around the answer. My military relocation checklist for New Braunfels covers the move side, and if you are looking near the base, my post on the JBSA-Randolph military notice covers another document you may see.
How do you ask for a funding fee refund after closing?
Start with VA’s regional loan center, and keep your paperwork together. A refund question is much easier to work through when the documents that show the dates are already in one place.
The refund itself runs through VA. VA’s funding fee page tells veterans who think they are eligible for a refund to call their VA regional loan center, and the Inspector General’s audit describes regional loan center staff as the people who review refund eligibility and process refunds. Have your loan number and closing date ready when you call.
Keep these together:
- Your Closing Disclosure showing the funding fee paid.
- VA’s decision on your claim, with its effective date.
- Your loan number and servicer contact.
Keep that file with your other house records. For the Texas property tax questions that come up for veterans buying here, my post on buying with a 100 percent VA rating is the place to start.
