- You may qualify for a VA Funding Fee refund if you have a service-connected disability claim with an effective date retroactive to your VA loan closing date.
- To request a refund, contact your original VA lender, loan servicer or the VA Regional Loan Center.
- If you receive a refund, you must declare it as income on your tax return, though the VA Funding Fee itself is tax-deductible.
The VA Funding Fee is a one-time cost applied to most VA loans, but some Veterans are exempt from the fee entirely, while others may be eligible for a refund after closing.
The fee is required by the Department of Veterans Affairs to help cover losses if a VA loan goes into default. The funding fee applies to all purchase and refinance loans and is typically 2.15% of the loan amount for most first-time VA borrowers.
Below, we cover who qualifies for a VA Funding Fee refund and the steps required to get one.
Who Can Get a VA Funding Fee Refund?
To be eligible for a VA Funding Fee refund, a Veteran must have a disability claim with an effective date retroactive to the closing date on their VA loan.
VA homebuyers qualified to get a funding fee refund include the following:
- Veterans receiving disability compensation for a service-connected disability
- Veterans who are entitled to receive disability compensation, but instead receive retirement or active service pay
- Active-duty service members who are eligible for compensation based on their pre-discharge disability rating/review (please note that the rating must be received before the loan closes)
- Purple Heart recipients
- Surviving spouses receiving Dependency and Indemnity Compensation (DIC)
The most common instances for VA Funding Fee refunds are active-duty service members with pre-discharge disability claims. Service members receiving a proposed or memorandum disability rating dated before their loan closing may be eligible for a funding fee refund.
The key is when the pre-discharge claim is adjudicated. According to VA policy guidelines, service members who receive a proposed or memorandum rating dated after closing on their VA loan are not eligible for a funding fee refund.
If you're unsure of your refund status, contact your lender, servicer or the VA Regional Loan Center at 1-877-827-3702.
VA Funding Fee Refund Process
The process of getting your funding fee refunded is pretty straightforward. You have two options:
- Contact your original VA lender or loan servicer
- Contact your VA Regional Loan Center at 1-877-827-3702.
Talking with your mortgage lender or servicer is usually your best first step if you have questions about getting a refund of the VA Funding Fee.
Funding Fee Refunds and Certificate of Eligibility
Your Certificate of Eligibility (COE) typically denotes whether you're exempt from paying the funding fee. But there are times when things aren't as straightforward.
In some cases, borrowers will have a disability claim pending at the time of their loan closing. Others might be planning to file a claim at a later date. Depending on the circumstances, some borrowers will be eligible for a refund of the funding fee after closing.
In terms of the mortgage process, it's the lender's responsibility to verify the borrower's funding fee exemption status.
Lenders will rely on the VA for guidance. Veterans and service members will need to pay the funding fee at closing unless lenders have clear documentation from the VA indicating they're exempt, which includes borrowers with a pending disability claim.
Are IRRRLs Eligible for a Funding Fee Refund?
Though Interest Rate Reduction Refinancing Loans (IRRRLs) don’t require a Certificate of Eligibility, they’re still eligible for a funding fee refund, assuming you meet the usual exemption requirements. Since there’s no COE to denote eligibility for the exemption, ask your lender for a printed verification.
Funding Fee Refunds and Military ETS
Service members nearing their Expiration of Term of Service (ETS) with a pending pre-discharge disability claim may qualify for a VA Funding Fee exemption before their loan closes. Important to note, the lender needs to obtain a proposed or memorandum rating from the VA prior to the loan closing. Without that documentation in hand, the buyer would not be exempt from the fee.
Since the VA Funding Fee goes directly to the Department of Veterans Affairs (VA), it's ultimately up to the VA to determine your refund eligibility.
Receiving Your VA Funding Fee Refund
Veterans entitled to a refund of their VA Funding Fee will receive it directly from the Department of Veterans Affairs. Mortgage lenders aren’t required to reduce the principal loan balance to reflect the refund.
Veterans who choose to finance the funding fee into their loan can keep the cash or make a principal-only payment on the loan to reduce their overall balance. Doing that doesn’t change your monthly mortgage payment, but it can save on interest charges paid over the life of the loan.
When to Expect Your Funding Fee Refund
After submitting your initial refund request, most Veterans can expect to receive their VA Funding Fee refund within 10 business days.
Tax Implications and VA Funding Fee Refunds
Starting in 2026, the VA Funding Fee is now tax-deductible, offering eligible Veterans, service members and surviving spouses another way to offset some of the cost. Keep in mind that tax rules vary depending on your individual filing situation, so connecting with a qualified tax professional is recommended to claim the deduction correctly.
Important to note, if you receive a refund of the VA Funding Fee, you will be required to declare it as income on your tax return.
If you have questions about the VA Funding Fee or a potential refund, talk with a Veterans United VA loan expert at 855-870-8845 or get started online today.
How We Maintain Content Accuracy
Our mortgage experts continuously track industry trends, regulatory changes, and market conditions to keep our information accurate and relevant. We update our articles whenever new insights or updates become available to help you make informed homebuying and selling decisions.
Current Version
Sep 24, 2026
Written ByChris Birk
Reviewed ByTara Dometrorch
Minor copy updates to improve clarity and additional information added regarding tax law changes related to the VA Funding Fee. Fact-checked and reviewed by underwriter Tara Dometrorch.
Feb 6, 2025
Written ByChris Birk
Edited to specify all parties eligible for a VA funding fee refund and including information on IRRRL eligibility.
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