Veteran couple feeling secure on their new porch

Waive Your VA Loan Funding Fee in Austin and San Antonio

Q: What is the purpose of the VA funding fee and what factors determine its cost?

A lender's seasoning period is a mandatory waiting time after you purchase or refinance a property before you can access the full after-repair value (ARV) for a cash-out refinance. Most DSCR lenders require a seasoning period of 6 to 12 months. Refinancing before the seasoning period concludes typically means the lender will base the loan amount on your original purchase price plus rehab costs, which severely limits the amount of equity you can cash out. Waiting until after the period allows you to borrow against the full market value you created through your renovations.

Q: Who is exempt from paying the VA funding fee?

To justify a higher appraised value, you should provide the appraiser with a detailed and organized renovation packet. This packet removes guesswork and provides concrete evidence of the work performed. It should include: a cover letter summarizing the major upgrades, a detailed scope of work document itemizing all improvements, compelling before-and-after photos showing the property's transformation, copies of paid invoices and receipts for materials and labor, and copies of any official building permits that were issued for the work.

Q: What happens if I close on my VA loan while my disability claim is still pending?

No, LTV limits for cash-out refinances vary significantly among different DSCR lenders, as each has its own guidelines and risk tolerance. While purchase loans may reach 80% LTV, cash-out refinances are often capped at 70% or 75% LTV. The specific LTV offered to an investor is influenced by several factors, including: Credit Score (higher scores typically qualify for higher LTVs), DSCR Ratio (a stronger income-to-debt ratio may result in a better LTV offer), Property Type (a single-family home might receive a higher LTV than a multi-unit property), and Loan Amount (some lenders may offer different terms based on the size of the loan).

Q: How can I get a refund for the VA funding fee if I paid it before my disability was approved?

Your property's monthly rental income is the foundation of a DSCR loan approval. The formula is: DSCR = Gross Rental Income / Total Monthly Housing Payment. A higher rent results in a higher DSCR. This proves to the lender that the property can comfortably support a larger loan payment, which in turn allows you to qualify for a larger loan amount and maximize your cash-out.

Q: What specific documents are required for the VA funding fee waiver?

Yes, it is often possible to pay for closing costs with the proceeds from your new loan, meaning you don't need to bring cash to closing. However, these costs are not added on top of your loan limit. Instead, the closing costs are subtracted from the total cash-out funds available to you after your existing mortgage is paid off. The total loan amount, including these costs, cannot exceed the lender's maximum LTV limit based on the property's appraised value.

Q: Do I need a high disability rating to qualify for the funding fee exemption?

Investors can make several avoidable errors that reduce their available cash-out funds. The most common mistakes include: Poor Documentation (failing to provide an appraiser with a thorough renovation packet can lead to a conservative and lower valuation), Refinancing Too Soon (not waiting for the lender's seasoning period to expire is a costly mistake that forces the loan to be based on cost rather than value), Lacking a Tenant (attempting to refinance a vacant property is less favorable, as lenders prefer the security of a signed lease over estimated market rents), and Ignoring Lender Differences (accepting the first loan offer without comparing options can mean missing out on better LTV limits or shorter seasoning requirements from other lenders).

Q: Does the funding fee exemption also apply to VA refinance loans?

The ideal time to begin the refinance process is 30 to 45 days before your lender's seasoning period expires. This allows you to gather all necessary documentation, secure an appraisal, and complete underwriting so that you can close immediately once the seasoning requirement is met. Crucially, by this time, the property should also be 'stabilized,' which means you have a qualified tenant in place with a signed lease and have collected at least the first month's rent.

June 15, 2026

Specialized In Jumbo Loans, Investor Loans, DSCR Loans, Non-QM Financing, Commercial Mortgages, and Tax-Informed Lending Strategies

Published By

David Ghazaryan

Owner / Broker / Banker

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(702) 766-3744

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TL;DR

The VA funding fee is a one-time charge for most veterans using a VA loan, but an exemption is available for those with a service-connected disability.
If you close on your home while a disability claim is pending, you may have to pay the fee upfront but could be eligible for a full refund.
Eligibility for a refund depends on the effective date of your disability award being earlier than your loan's closing date.
This guide outlines the necessary documentation and steps to secure a waiver or a refund for your VA funding fee.

What is the Veteran Affairs funding fee and who is required to pay it?

The Veteran Affairs (VA) funding fee is a one-time payment made to the Department of Veterans Affairs by the veteran or service member. This fee helps to offset the cost of the loan program to taxpayers, as VA loans do not require a down payment or monthly mortgage insurance. The amount of the fee is a percentage of the loan amount and varies based on three key factors:

Your service type: Regular military, Reserves, or National Guard.
Your down payment amount: Putting 5% or more down reduces the fee.
Your history with the VA loan program: The fee is higher for subsequent use compared to first-time use.

For example, a first-time active-duty veteran buying a $400,000 home in Austin with no down payment would pay a funding fee of 2.15%, or $8,600. A subsequent user under the same conditions would pay 3.3%, or $13,200. (The data, information, or policy mentioned here may vary over time.) This fee can be paid in cash at closing or, more commonly, rolled into the total loan amount.

However, you are exempt from paying the fee if you are a:

Veteran receiving VA compensation for a service-connected disability.
Veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay.
Surviving spouse of a Veteran who died in service or from a service-connected disability.

How does a pending disability claim affect my funding fee status?

This is where timing becomes critical for veterans who have filed a disability claim but have not yet received a rating. If you close on your home while your claim is pending, your lender will likely require you to pay the funding fee because your Certificate of Eligibility (COE) will not yet show an exempt status.

Veteran reviewing mortgage paperwork for VA loan

However, you can get this fee refunded. The key is the effective date of your disability award. If the VA determines the effective date of your disability is prior to your loan closing date, you are entitled to a full refund of the funding fee you paid.

For instance, imagine you are buying a home in San Antonio and your closing date is June 15th. You filed a disability claim in January. In August, the VA grants you a disability rating with an effective date of February 1st. Because the effective date is before your closing date, you can apply for and receive a refund of the entire funding fee.

What specific documents do I need to provide the lender in Austin?

To prove your eligibility for a funding fee waiver, your lender in Austin needs official documentation from the VA. Your Certificate of Eligibility (COE) is the primary document.

For a Pre-Closing Waiver: Your COE must explicitly state that you are 'EXEMPT' from the funding fee. This is the cleanest and most direct way to avoid the fee at closing. Lenders pull this document directly from the VA's system.
For a Post-Closing Refund: If you paid the fee and later received your rating, you will need to provide your lender with a copy of your official VA award letter. This letter details your disability rating and, most importantly, the effective date of the award. Your lender will use this document to file for a refund on your behalf.

In some cases, a proposed or memorandum rating document issued before a veteran's official discharge can also serve as proof, but the official award letter is the standard requirement for a refund.

Can I get the funding fee waived if my disability rating is not yet official?

No, you cannot typically get the fee waived at the closing table if your disability rating is not yet official. Lenders are bound by the information on your Certificate of Eligibility at the time of closing. If the COE does not show an 'EXEMPT' status, the lender is required by the VA to collect the funding fee.

There is no mechanism for a lender to prospectively waive the fee based on a pending claim. The system is designed to charge the fee first and refund it later if eligibility is established retroactively. The only way to avoid paying the fee upfront is to delay your home purchase until your disability rating is finalized and your COE is updated, though this is often not practical.

What is the process for getting a refund if I pay the fee and then get my rating?

Getting a refund is a straightforward but not instantaneous process. If you paid the VA funding fee and your subsequent disability rating has an effective date before your loan closing, you should take the following steps:

VA award letter confirming disability status for a funding fee refund

Contact Your Lender Immediately: As soon as you receive your official VA disability award letter, contact the mortgage lender who handled your home loan. Do not contact the VA directly, as the lender must initiate the refund request.
Provide Documentation: Send your lender a complete copy of the VA award letter. Highlight the section that shows the effective date of your disability rating.
Lender Submits the Request: Your lender will review the document and submit a formal request for a refund to the appropriate VA Regional Loan Center.
Receive Your Refund: The VA will process the request and, upon approval, will issue the refund. The refund is typically sent directly to you as a check or direct deposit. It is not applied to your loan principal. The process can take anywhere from a few weeks to several months, so consistent follow-up with your lender is advised.

How does a zero percent disability rating impact the fee in San Antonio?

A common misconception is that you need a high disability rating, like 30% or 50%, to qualify for the funding fee waiver. This is incorrect. Any service-connected disability rating, even 0%, qualifies you for a full exemption from the VA funding fee.

A 0% rating acknowledges that a veteran has a service-connected condition, but it is not severe enough to impair earning capacity. For example, a veteran in San Antonio might receive a 0% rating for tinnitus or a minor scar. Despite the rating being 0%, the VA recognizes it as a service-connected disability, and that veteran is exempt from paying the funding fee on their VA home loan. This can save them thousands of dollars at closing.

When should I notify my lender about a change in my disability status?

You should notify your lender about any change or potential change in your disability status as soon as possible. Communication is key to a smooth process.

Before Closing: If you are in the process of buying a home and have a pending claim, let your loan officer know. While they can't waive the fee without official documentation, they can prepare you for the potential refund process and ensure you know what to do once your rating comes through.
After Closing: The moment you receive your disability award letter in the mail, contact your lender. The sooner you provide the documentation, the sooner they can submit the refund request to the VA and start the clock on your reimbursement.

Does the funding fee waiver apply to Veteran Affairs IRRRL loans as well?

Yes, the funding fee exemption absolutely applies to VA Interest Rate Reduction Refinance Loans (IRRRLs), also known as VA Streamline Refinances. The standard funding fee for an IRRRL is 0.5% of the loan amount for all users. (The data, information, or policy mentioned here may vary over time.) If you are a veteran with a service-connected disability rating, you are exempt from paying this 0.5% fee.

This is a significant benefit. For a veteran refinancing a $350,000 mortgage in Texas, this exemption saves them $1,750 in closing costs, making the refinance even more financially advantageous. Navigating the timing of a VA loan with a pending disability claim requires expertise. If you're a veteran in Texas, consult with a VA loan specialist to ensure you don't leave thousands of dollars on the table. When you're ready to proceed with confidence, Apply now for expert guidance.

Ready to navigate the VA loan process with confidence? Partner with a specialist who can help you maximize your benefits and save thousands.

Author Bio

David Ghazaryan is the expert mortgage strategist and founder behind iQRATE Mortgages. With a mission to fund home loans that traditional banks won't touch, David specializes in helping clients with unique financial situations, including those recovering from foreclosure or bankruptcy. He expertly crafts smart, strategic, and stress-free mortgages by leveraging a vast network of over 100 lenders to secure competitive rates for investors and homebuyers alike. Praised for exceptional customer service, David has helped hundreds of families with a 97% satisfaction rate, guiding them to the mortgage they deserve.