Kenneth's Story: Why Most Disabled Veterans Never Claim Their Zero Funding Fee
Kenneth Almost Paid a Fee He Never Owed
Kenneth is a veteran drawing VA disability compensation. When he first started shopping for a VA loan, his lender ran the numbers the same way they did for every borrower and quoted him the standard VA funding fee. Nobody on the other end thought to ask about his disability rating before generating that quote. It was an easy mistake to miss, and it almost cost him real money.
What Kenneth's Prior Lender Got Wrong
This is a situation that comes up often with veterans. The funding fee gets treated as a flat, unavoidable cost baked into every VA loan, when in reality a whole category of veterans is exempt from it entirely. The gap isn't dishonesty, it's a process that never prompted anyone to ask the right question at the right time.
The Actual Rule
Here is the guidance, word for word: "The VA funding fee is typically 2.15% for first-time use and 3.3% for subsequent use and can be financed. Veterans receiving VA disability compensation, those entitled to it but drawing retirement or active-duty pay, active-duty Purple Heart recipients, and eligible surviving spouses are exempt from the funding fee."
That means if you're a veteran drawing VA disability, or entitled to it while drawing retirement or active-duty pay, or an active-duty Purple Heart recipient, or an eligible surviving spouse, this fee should never appear on your closing disclosure. On a first-time VA loan, that's 2.15 percent of your loan amount that stays in your pocket instead of going to a fee.
Why Overlays Get in the Way
Some lenders build in extra internal steps before they'll confirm a disability exemption, or they simply don't ask about disability status early in the process. That's a lender overlay, not a VA requirement. It slows things down and, in Kenneth's case, almost led to a fee he was never supposed to pay.
How I Handled It
Before locking anything on Kenneth's loan, I asked directly about his VA disability status and pulled his VA disability award letter for verification. Once that was confirmed with the lender, the funding fee came off the loan completely. No fee, no confusion, no surprise at closing.
The Broker Advantage
As a broker, I'm not locked into one lender's process or one lender's overlay wall. I can place a veteran's loan with whichever lender handles VA exemptions cleanly and efficiently, which matters when you're trying to avoid unnecessary delays or costs.
One Thing to Do Today
If you're a veteran drawing VA disability compensation, or you fall into one of the other exempt categories, say so before your loan is ever quoted. Don't wait for a lender to ask. Bring your VA disability award letter to the conversation early.
Kenneth's fee got waived because we caught it before closing. If you're a veteran heading into a home purchase or VA construction loan, make sure your exemption gets caught too. Reach out and I'll walk through your specific situation with you.