This article will guide you on receiving a refund for your VA funding fee, including eligibility.
Purchasing a home usually requires a downpayment of 20% of the home price. Anyone who doesn't have 20% to put down may still be able to get a home loan but will have to pay additional mortgage insurance, increasing their monthly mortgage payments. Veterans benefit from their service by qualifying for a VA loan, which allows those with a history of honorable service to purchase a home without needing mortgage insurance or a down payment.
When service members and veterans use the VA loan program to buy a home, they usually pay the VA funding fee, which is added to the loan. This fee covers the administrative costs of running the program.
Refund Eligibility
Minimum Disability Percentage: Veterans must have a compensable, service-connected disability. Basically, you have to be getting paid by the VA for a condition that is service-connected. It would be misleading to say that you have to have a minimum percentage rating because there are rare instances where a veteran is rated 0% but is still receiving compensation.
Timeline: The VA compensation must be granted or backdated to before the closing date of the loan. Personal story time. I closed on a VA loan in October 2020. Around the same time I was applying for VA disability. I frantically pulled out my VA rating paperwork and it read:
I missed being eligible for a refund of thousands of dollars because my loan closed 52 days before the effective date of my VA rating.
IMPORTANT: If you are going through the VA home loan process while simultaneously going through the VA disability rating process, you must fill out a VA Form 8937 and have your loan officer submit this form to the VA. Not doing so could make you ineligible for a refund once your rating is awarded.
How to Apply For A Refund
The VA funding fee should be automatically refunded to you as long as you submit a Form 8937 through your lender and receive a backdated compensation claim. In the rare instance where the funding fee is not refunded, you'll need to contact the VA Home Loan Contact Center at 1-877-827-3702, option 2.
Get the Documents You Need:
● A copy of the letter from the VA that says you are disabled.
● Information about your VA loan, like the loan number and the date it closed.
● Notice of Release or Discharge from Active Duty (DD-214).
And remember...
You won’t have to pay a VA funding fee if any of these descriptions are true for you:
You’re receiving VA compensation for a service-connected disability, or
You’re eligible to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead, or
You’re receiving Dependency and Indemnity Compensation (DIC) as the surviving spouse of a Veteran, or
You’re a service member who has received a proposed or memorandum rating before the loan closing date that says you’re eligible to get compensation because of a pre-discharge claim, or
You’re a service member on active duty who, before or on the loan closing date, provides evidence of having received the Purple Heart ready to explain everything! Start with a catchy introductory sentence or two to get the ball rolling, and then begin sharing your insights with your audience.
For Additional Help
Reach out to the VA Regional Loan Center at 1-877-827-3702. They are available Monday through Friday, from 8:00 am - 6:00 pm EST.
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