Veteran feeling relieved reviewing iQRATE Mortgages fee waiver.

Waiving the VA Funding Fee in Houston & San Antonio

Q: What is the purpose of the VA funding fee?

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: How does the size of my down payment impact the VA funding fee rate?

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: Who is exempt from paying the VA funding fee?

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: Is a specific disability rating required to qualify for the funding fee waiver?

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 happens if I have a pending disability claim when closing on my home?

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: How does a mortgage lender verify my exemption status?

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: Can I get a refund if I paid the funding fee but was already exempt at closing?

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.

April 11, 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

Contact Me At

(702) 766-3744

NMLS 1486726

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TL;DR

The VA funding fee is a one-time closing cost on VA-backed loans that helps lower the program's expense for taxpayers. It is typically financed by being rolled into the total loan amount rather than paid in cash.
The fee's percentage varies based on your service type, whether it is your first time using the benefit, and the size of your down payment. A larger down payment can significantly reduce the fee.
Veterans who are receiving compensation for a service-connected disability are exempt from paying the fee. The exemption is not based on a minimum disability rating percentage but on the actual receipt of compensation.
Eligibility for the waiver is verified by your lender through your Certificate of Eligibility (COE). Other exempt parties include certain active-duty Purple Heart recipients and eligible surviving spouses receiving Dependency and Indemnity Compensation (DIC).
If your disability claim is pending at closing, you must pay the fee but may be eligible for a full refund if the claim is later approved with an effective date before your closing date. This exemption also applies to the 0.5% fee on VA Streamline Refinances (IRRRLs).

What is the VA Funding Fee and How Is It Calculated?

The VA funding fee is a one-time payment made to the Department of Veterans Affairs (VA) when you get a VA-backed loan. This fee helps to lower the cost of the loan for U.S. taxpayers, as the VA home loan program doesn't require a down payment or monthly mortgage insurance. Instead of being paid in cash at closing, this fee is typically rolled into the total loan amount.

The amount you pay depends on several factors: your military service type, whether it's your first time using your VA loan benefit, the size of your down payment, and the type of loan.

Here’s a breakdown of the funding fee percentages for purchases and construction loans for Veterans, Active Duty, National Guard, and Reserve members:

First-Time Use:
- 0% down payment: 2.15%
- 5% to 9.9% down payment: 1.5%
- 10% or more down payment: 1.25%
Subsequent Use:
- 0% down payment: 3.3%
- 5% to 9.9% down payment: 1.5%
- 10% or more down payment: 1.25% (The data, information, or policy mentioned here may vary over time.)

Example Calculation

Imagine you are a veteran buying your first home in Houston for $400,000 with no down payment. Your funding fee would be calculated as follows:

$400,000 (Loan Amount) x 2.15% (Fee) = $8,600

This $8,600 would be added to your loan balance, making your total loan $408,600. However, thousands of veterans in Texas are completely exempt from this fee.

Which Veterans Are Exempt From Paying the Funding Fee in Houston?

The VA grants an exemption from the funding fee to specific groups of veterans and surviving spouses. You do not have to pay the fee if you are a veteran who is:

Receiving VA compensation for a service-connected disability.
Entitled to receive VA compensation for a service-connected disability, but you're receiving retirement or active-duty pay instead.
An active-duty service member who provides evidence of having received the Purple Heart before the closing date.
A surviving spouse of a veteran who died in service or from a service-connected disability, or who was totally disabled, and you are receiving Dependency and Indemnity Compensation (DIC). (The data, information, or policy mentioned here may vary over time.)

A military service member with their family, eligible for VA loan benefits.

Your eligibility for the waiver is determined at the time of your loan closing. Your lender will verify your status using your Certificate of Eligibility (COE).

What Disability Rating Do I Need for the Waiver in San Antonio?

This is a common point of confusion. There is no minimum disability rating percentage required to qualify for the funding fee waiver. A veteran with a 10% rating and a veteran with a 100% rating are both exempt, provided they are receiving VA disability compensation.

The key factor is not the rating itself, but the receipt of compensation for a service-connected condition. Even a 0% rating can sometimes qualify if it's deemed 'compensable' by the VA, entitling the veteran to certain benefits like healthcare, which proves the service connection.

What If My Disability Claim is Pending?

If you are a veteran purchasing a home in San Antonio and have a disability claim pending with the VA, you must pay the funding fee at closing. However, you can secure a refund. If the VA later approves your claim and the effective date of your benefits is before your loan closing date, you are entitled to a full refund of the funding fee. It is crucial to keep your lender informed about your pending claim status throughout the homebuying process. (The data, information, or policy mentioned here may vary over time.)

How Do I Provide My Certificate of Eligibility to the Lender?

Your Certificate of Eligibility (COE) is the primary document lenders use to confirm your entitlement to a VA loan and your funding fee exemption status. In most cases, you don't need to track this down yourself. Lenders with access to the VA's automated system can obtain your COE in minutes.

When the lender pulls your COE, it will explicitly state whether you are 'Exempt' or 'Not Exempt' from the funding fee. If the COE indicates you are exempt, no further documentation is needed.

House keys and mortgage documents on a table, symbolizing the VA loan closing process.

If your COE does not show an exemption but you believe you qualify, you will need to provide supporting documentation. The most common document is your official VA award letter that details your disability compensation. Providing this to your lender allows them to update your status and ensure the fee is waived.

What Happens If My Disability Status Changes After I Close?

The rule is straightforward: your exemption status is determined on the day of closing and is not retroactive for that specific loan. If you close on your home and are later awarded a disability rating from the VA, you cannot apply for a refund of the funding fee you already paid.

For example, if you closed on your Houston home on May 15th and your disability was later granted with an effective date of June 1st, you would not be eligible for a refund on that transaction. However, the good news is that you will be exempt from the funding fee on any future VA-backed loans you obtain, whether it's for a new purchase or a refinance.

Can I Get a Refund If I Paid the Funding Fee But Was Exempt?

Yes, you can and should get a refund if you were exempt at closing but paid the fee anyway. This situation typically arises for two reasons:

Pending Claim: As mentioned, your pending disability claim was approved retroactively to a date before your loan closing.
Administrative Error: Your COE was incorrect, or the proper documentation was not processed in time for closing.

To get your refund, you should not contact your mortgage lender. The process is handled directly through the VA. You will need to contact the VA Regional Loan Center that serves your state and provide them with:

A copy of your settlement statement (Closing Disclosure) showing you paid the fee.
A copy of your VA disability award letter (or other official documentation) proving your exempt status as of the closing date.

The VA will process your request and issue a refund directly to you. It's important to be proactive, as this process does not happen automatically.

Does the Funding Fee Waiver Apply to IRRRL Loans as Well?

Yes, the exemption absolutely applies to an Interest Rate Reduction Refinance Loan (IRRRL), also known as a VA Streamline Refinance. The standard funding fee for an IRRRL is a flat 0.5% of the loan amount for all borrowers, regardless of prior use or down payment. (The data, information, or policy mentioned here may vary over time.)

If you are an exempt veteran refinancing your home in San Antonio, this 0.5% fee is waived. This can save you a significant amount of money. For instance, on a $350,000 IRRRL, an exempt veteran saves $1,750 ($350,000 x 0.5%) in closing costs, making the refinance even more financially beneficial.

Are Surviving Spouses Required to Pay the Funding Fee?

Surviving spouses are generally not required to pay the VA funding fee, provided they meet specific criteria. A surviving spouse is exempt if they are receiving Dependency and Indemnity Compensation (DIC).

You are typically eligible for DIC if you are the surviving spouse of a veteran who:

Died while in service (active duty or active duty for training), OR
Died from a service-connected injury or illness. (The data, information, or policy mentioned here may vary over time.)

If you meet these requirements, your COE will reflect your exempt status. This allows an eligible surviving spouse to purchase a home using a VA loan without the added cost of the funding fee, honoring the service and sacrifice of their loved one. If you're a veteran in Texas unsure about your funding fee status or have a pending disability claim, navigating the process is key. A knowledgeable mortgage advisor can help you verify your exemption status and ensure you don't overpay at closing.

Ready to leverage your VA benefits? Our experts can clarify your funding fee status and guide you through the mortgage process. Apply for a Mortgage to explore your homeownership options today.

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.