VA Funding Fee Exemption: How to Verify It Before Closing in Florida

Last reviewed: September 5, 2026. If you receive VA compensation for a service-connected disability, you generally do not have to pay the VA funding fee on an eligible VA-backed or VA direct home loan. Other exemption categories may also apply. Your exemption status must be confirmed for your specific loan before closing.

For a St. Petersburg or Pinellas County buyer, confirming the status early can improve the cash-to-close estimate alongside the down payment, title charges, prepaid insurance, property taxes, and escrow items. This guide explains common exemption paths, how verification works, what a pending claim may mean, and where to review the funding fee on your mortgage disclosures.

Quick answer: Does VA disability compensation eliminate the funding fee?

Usually, yes, when you are receiving VA compensation for a service-connected disability. VA also identifies other potential exemption paths, including borrowers who would receive service-connected disability compensation but receive retirement or active-duty pay instead, eligible surviving spouses receiving Dependency and Indemnity Compensation, certain active-duty service members with a proposed or memorandum rating before closing, and active-duty Purple Heart recipients who provide the required evidence by closing.

Eligibility is not determined by a generic article or calculator. VA records and documentation establish the applicable status, and the lender must verify and document that status for the loan before closing. Creative 1st Mortgage cannot independently override a VA determination.

VA funding-fee guidance and the VA Lender's Handbook should be checked for current requirements.

What is the VA funding fee?

The VA funding fee is a one-time charge on many VA-backed and VA direct home loans. VA says the fee helps reduce the program's cost to taxpayers because VA loans generally do not require a down payment or monthly mortgage insurance.

If you are not exempt, the amount depends on factors such as the transaction type, loan amount, prior VA-loan use, and, for certain purchase loans, the down payment. Funding-fee rates and applicability rules can change, so ask the lender to calculate the fee for the exact loan scenario and confirm the current VA guidance before finalizing the loan.

Who may be exempt from the VA funding fee?

Common VA exemption paths include:

• Receiving VA compensation for a service-connected disability.
• Being eligible for service-connected disability compensation but receiving retirement or active-duty pay instead.
• Being an eligible surviving spouse receiving Dependency and Indemnity Compensation, or DIC.
• Being an active-duty service member with a proposed or memorandum rating issued before closing that establishes eligibility for compensation from a pre-discharge claim.
• Being on active duty and providing evidence by closing of having received the Purple Heart.

The exemption applies to the VA funding fee. It does not eliminate other transaction-specific costs such as appraisal, title, recording, prepaid interest, homeowners insurance, taxes, escrow reserves, or permitted lender charges.

How to verify your exemption before closing

1. Tell the lender about your circumstances

Tell the loan team if you receive VA disability compensation, receive retirement or active-duty pay instead of compensation, receive DIC, have a Purple Heart, or have a pending disability claim. Share changes promptly, even if you believe your existing Certificate of Eligibility already answers the question.

2. Review the Certificate of Eligibility

The funding-fee field on the COE may show Exempt, Non-Exempt, or a direction to contact the VA Regional Loan Center. The VA Lender's Handbook explains that lenders may rely on an exempt status shown on the COE, subject to any conditions listed there.

For an Interest Rate Reduction Refinance Loan, VA guidance states that the funding-fee exemption status is displayed in the VA loan system when the case number is ordered. The lender should explain how the status was confirmed for that transaction.

3. Provide documentation if VA or the lender requires it

Depending on the facts, verification may involve the COE, VA systems, a VA award or notification letter, retirement-income documentation, a Purple Heart record, or VA Form 26-8937, Verification of VA Benefits. The exact documentation depends on the borrower's circumstances and the status shown in VA records.

Ask the loan team to use its secure document-upload process for sensitive records.

4. Confirm the result before final closing figures

Ask: “Has my VA funding-fee exemption been verified, and is the funding fee included in my final loan amount or cash to close?”

VA instructs lenders to establish exemption status before closing and not to tell a borrower to close with the fee while simply planning to request a refund later. Refund determinations are fact-specific and cannot be guaranteed.

What if my disability claim is pending?

A pending claim is not automatically a funding-fee exemption.

If the COE shows non-exempt and a compensation claim is pending, ask the lender whether an updated COE or other VA verification is needed before closing. The timing depends on the circumstances and VA processing, so notify the loan team as early as possible and do not assume that filing a claim or submitting an intent to file is enough.

For an active-duty service member with a pre-discharge claim, VA guidance provides a more specific path. A proposed or memorandum rating issued before closing may establish exemption eligibility. If the required rating is not obtained before closing, the exemption may not apply at that time.

Ask the lender to explain whether the claim is being handled as a standard pending claim or an active-duty pre-discharge claim and what VA documentation is required.

Can I receive a refund if I paid the funding fee?

A refund may be possible in limited circumstances. VA states that a later award of service-connected disability compensation may support a refund when the compensation effective date is retroactive to before the loan closing date.

Not every later rating creates a refund right. VA's guidance also states that an active-duty service member who closes without the required proposed or memorandum rating is not entitled to a refund based only on receiving that rating after closing.

If you believe the fee was charged incorrectly, contact the lender or servicer and ask how the matter should be submitted to VA. Keep the Closing Disclosure, COE, award documentation, and other relevant records.

How an exemption affects Florida cash to close

If you are exempt, the VA funding fee should not be charged or added to the loan for that transaction. If you are not exempt, VA rules may permit the fee to be paid at closing or financed, depending on the loan type and applicable requirements. Financing the fee can reduce the immediate cash needed for that charge but increases the amount borrowed and may increase interest paid over time.

For a VA purchase or construction-permanent loan, VA states that the funding fee may be financed into the loan amount. Other closing charges must be addressed through the applicable combination of borrower funds, seller credits, lender credits, permitted contributions, or other approved arrangements.

For St. Petersburg and Pinellas County purchases, also budget for transaction-specific homeowners insurance, property taxes, prepaid items, and any initial escrow deposit. These amounts vary by property, policy, closing date, lender requirements, and contract terms.

When comparing VA with FHA or conventional financing, compare complete Loan Estimates for the same property and similar terms, not just the interest rate or one upfront charge. See How to Compare Mortgage Loan Estimates in Florida and St. Petersburg FHA Loans.

Where to review the funding fee on your disclosures

The CFPB explains that a VA funding fee appears in the Loan Estimate's closing-cost details, and the Estimated Cash to Close calculation reflects the transaction's estimated funds required. If the fee is financed, review how it affects the loan amount.

The Closing Disclosure shows final loan terms, closing costs, and cash to close. You generally must receive it at least three business days before closing. Compare it with the most recent Loan Estimate and immediately ask the lender about a funding fee that appears unexpectedly or an exemption that is missing.

For broader budgeting context, read How Insurance Affects Mortgage Qualification in St. Petersburg.

Pre-closing checklist

• Tell the loan team about disability compensation or another possible exemption path.
• Ask how the exemption status was verified through the COE, VA systems, or required documentation.
• If the COE says non-exempt and your circumstances changed, ask whether updated VA verification is appropriate.
• If a claim is pending, clarify the claim type and required timing.
• Review the funding-fee line, loan amount, credits, and estimated cash to close on the Loan Estimate.
• Review the final Closing Disclosure at least three business days before closing.
• Keep your COE, award letters, verification documents, and Closing Disclosure.

Related VA homebuying questions

Read more about VA Loan DTI Over 41%: Residual Income in Florida, Can You Buy an Unapproved St. Petersburg Condo With VA?, and Can My Ex-Spouse Assume My VA Mortgage After Divorce?.

Official resources

• VA Funding Fee and Loan Closing Costs
• VA Circular 26-23-19: Funding Fee Exemption and Refund Procedures
• VA Lender's Handbook, VA Pamphlet 26-7
• CFPB Loan Estimate explainer
• CFPB Closing Disclosure explainer

Compliance note: This article is educational only. VA program rules, funding-fee amounts, exemption determinations, loan terms, property costs, and underwriting requirements may change and vary by borrower and transaction. Subject to underwriting and credit approval. Not a commitment to lend.