A veteran buying with nothing down receives VA compensation for a 30% service-connected disability and is quoted a funding fee of $6,880. Does receiving this service-connected disability compensation exempt the veteran from the funding fee?
Correct Answer
D) No funding fee is owed, as compensation exempts the veteran
D. Receiving the specified VA disability compensation qualifies for exemption. VA lists receipt of compensation for a service-connected disability as a funding-fee exemption. The stated 30% rating and zero down payment do not turn that exemption into a partial discount. Scope and exceptions: Verify exemption status before closing. A later disability award can raise a separate refund question based on its effective date; not every later rating creates a refund. Other closing costs remain separate. Source: Will I have to pay the VA funding fee?; Funding fee refunds — https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/
Why This Is the Correct Answer
D. Receiving the specified VA disability compensation qualifies for exemption. VA lists receipt of compensation for a service-connected disability as a funding-fee exemption. The stated 30% rating and zero down payment do not turn that exemption into a partial discount. Scope and exceptions: Verify exemption status before closing. A later disability award can raise a separate refund question based on its effective date; not every later rating creates a refund. Other closing costs remain separate.
Why the Other Options Are Wrong
Option A: The fee is halved to $3,440 because the rating is under 50%
VA does not apply the proposed half-fee rule to this exempt borrower.
Option B: The fee is owed but refunded 12 months after the loan closes
This borrower already meets an exemption; there is no mandatory twelve-month wait.
Option C: The fee is owed in full, since the loan is still fully financed
Financing the purchase without a down payment does not override the exemption.
Exam Tip
Check funding-fee exemption before calculating a funding-fee percentage.
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