Updated · Mike Certo, NMLS #260555 · Last verified against official VA source: 2026-06-09
VA Funding Fee Exemption Categories
The VA funding fee waiver is more accessible than many veterans realize. Eligibility is NOT based on a single percentage threshold — VA defines specific exemption categories. Here are the official categories per VA, with Arizona-specific verification guidance.
Official VA exemption categories
The VA funding fee is waived for veterans and surviving spouses in these official categories:
1. Veterans receiving VA compensation for a service-connected disability
Veterans currently receiving VA disability compensation are exempt from the funding fee. This includes any compensable service-connected disability — there is NO percentage threshold for this exemption. If you receive VA compensation for service-connected disability, you qualify.
2. Veterans entitled to receive VA compensation but receiving retirement pay instead
Some veterans waive VA disability compensation in favor of military retirement pay (a common scenario for retirees with both pension and rated disability). Even though you receive retirement pay instead of VA compensation, you remain entitled to the compensation — and the funding fee exemption applies.
3. Veterans with a qualifying proposed or memorandum rating before closing
If VA has issued a proposed or memorandum rating prior to closing — indicating service-connected disability eligibility — you qualify for the funding fee exemption, even if the formal rating has not yet been completed.
4. Surviving spouses receiving DIC benefits
Surviving spouses of veterans who died in service or from a service-connected disability and who are eligible for Dependency and Indemnity Compensation (DIC) qualify for the funding fee exemption.
5. Active-duty service members with Purple Heart
Active-duty service members who provide evidence of having been awarded the Purple Heart prior to closing qualify for the funding fee exemption.
How to verify your funding-fee status
- Check your Certificate of Eligibility (COE). VA COE indicates your funding fee status. Your lender pulls your COE during application.
- Verify with VA directly. If COE doesn't reflect a current rating, contact VA at the eBenefits portal or call 1-800-827-1000.
- Work with your loan officer. Mike helps verify and coordinate funding fee status before underwriting. We don't guess — we confirm.
Funding fee refund scenarios
If you paid the funding fee at closing but later receive an exemption-qualifying disability rating with an effective date before closing, you may be eligible for a funding fee refund from VA. Talk to your servicer and VA to verify refund eligibility.
Arizona veteran considerations
Arizona is home to over 500,000 veterans. Many are currently receiving VA compensation or have pending claims. If you have a pending VA disability claim and need to close before resolution, talk to Mike — sometimes the memorandum rating pathway works for time-sensitive purchases.
Next step
20-minute call. Bring your COE, VA disability rating status (if any), and target purchase scenario. We confirm funding fee status before underwriting.
Related
- VA Funding Fee Exemption Categories
- IRRRL Net Tangible Benefit
- VA Loan Assumption + Release of Liability
- VA Eligibility
- Talk to Mike
FAQ
Is there a 10% disability rating threshold for the funding fee waiver?
No. VA does not define exemption by a single percentage threshold. The exemption applies to veterans receiving (or eligible to receive) VA service-connected disability compensation, regardless of rating percentage. Verify your specific status via your COE.
I'm a retiree receiving military pension. Am I exempt?
Possibly — if you waived VA disability compensation in favor of retirement pay AND you would otherwise be entitled to that compensation. This is one of the official exemption categories.
What if my disability rating is still pending?
If VA has issued a proposed or memorandum rating before closing, you qualify for the exemption. If your rating is fully pending without a memorandum, the exemption typically can't be applied at closing — but you may qualify for a funding fee refund later.
Are Purple Heart recipients exempt?
Yes — active-duty service members with evidence of Purple Heart award prior to closing are exempt from the funding fee.