Veterans receiving VA compensation for a service-connected disability and certain other eligible borrowers are exempt from the VA funding fee, including on a Florida home purchase. The exemption depends on your verified VA status—not simply on having served, living in Florida, or filing a disability claim.
On a $400,000 purchase with no down payment, a non-exempt first-use borrower could owe an $8,600 funding fee. A qualifying exemption makes that fee $0. That is why your first question should be “Do I owe it?” before “Should I finance it?” Here is how to check, understand the numbers, and prepare for closing in Melbourne, Brevard County, or elsewhere on the Space Coast.
Updated October 2, 2026. By Joe Harris, COO, NMLS 322991.
Who qualifies for a VA funding fee exemption?
VA lists five qualifying situations. You do not need a 100% disability rating, but your lender must verify that you meet an applicable exemption:
- You receive VA compensation for a service-connected disability.
- You are eligible for that compensation but receive retirement or active-duty pay instead.
- You receive VA Dependency and Indemnity Compensation (DIC) as a surviving spouse.
- You are a service member who received a qualifying proposed or memorandum rating before closing, establishing compensation eligibility because of a pre-discharge claim.
- You are on active duty and provide evidence of a Purple Heart award on or before closing.
These are federal rules. A “VA funding fee waiver in Florida” is not a separate Florida discount, and a lender cannot simply waive the charge as a pricing concession. Read the VA’s official exemption criteria and ask which category applies to your documentation.
The funding fee supports the VA loan program and helps reduce its cost to taxpayers. It is different from monthly mortgage insurance: VA loans do not require monthly PMI or MIP, but non-exempt borrowers may owe this one-time fee. Our VA mortgage-insurance guide explains that distinction.
How do you verify your exemption before closing?
Ask your loan officer to review your Certificate of Eligibility (COE) and confirm the supporting records needed for your situation. If your COE says non-exempt but you believe that is incorrect, raise the discrepancy early so your lender can work with VA to resolve it.
Useful records may include a VA compensation award letter, qualifying pre-discharge rating, or Purple Heart evidence. The correct documents depend on the exemption. Do not assume that a disability percentage alone settles every case, or that an old COE reflects a recent change.
A pending disability claim does not, by itself, establish an exemption. Tell your loan officer about the claim and any decision you receive while the mortgage is in process. Do not plan your cash to close around an expected award or refund that has not been confirmed.
Before signing, have your loan officer or assistant walk through the funding-fee amount and your final disclosures. A verified exemption should mean no VA funding fee is charged. Exemption does not remove unrelated appraisal, title, insurance, tax, or other applicable transaction costs.
Could you be exempt from the VA funding fee?
Reach out to Morgan Financial. Our team can review your COE and supporting documentation with you to help verify whether you qualify for a VA funding fee exemption.
VA funding fee matrix: what if you are not exempt?
Your loan type, prior use, down payment, and loan amount determine the fee. These percentages are funding-fee rates, not mortgage interest rates. The matrix below applies to non-exempt borrowers.
| Loan type / down payment | First use | After first use |
|---|---|---|
| Purchase or construction: less than 5% down | 2.15% | 3.3% |
| Purchase or construction: 5% to less than 10% down | 1.5% | 1.5% |
| Purchase or construction: 10% or more down | 1.25% | 1.25% |
| Cash-out refinance | 2.15% | 3.3% |
| Interest Rate Reduction Refinance Loan (IRRRL) | 0.5% | 0.5% |
Source: VA funding fee rate charts, effective April 7, 2023. Other loan types have separate rates. Down-payment reductions shown here apply to purchase and construction loans, not refinances. VA also identifies a first-use-rate exception when your only earlier VA purchase was a manufactured home. Confirm your rate before relying on an estimate.
A $400,000 purchase: $8,600 or $0?
Assume a $400,000 purchase price, no down payment, first use, a $400,000 base loan, and no exemption. The calculation is $400,000 × 2.15% = $8,600. If you qualify for an exemption, the funding fee is $0. Other closing costs can still apply in either case.
The fee is calculated from the base loan amount, not automatically from the purchase price. A down payment can reduce both that amount and, at the applicable thresholds, the fee percentage. But do not choose a down payment solely to reduce this fee: consider the cash you will have left for moving, repairs, and reserves. This example is educational, not a Loan Estimate or approval.
Should you pay the funding fee at closing or finance it?
You can generally pay the fee at closing or include it in the loan. Financing reduces the cash needed for that fee upfront, but increases your balance and the interest associated with the additional borrowing. Financed does not mean free.
| Treatment | Funding fee paid in cash | Starting loan balance |
|---|---|---|
| Not exempt; pay fee at closing | $8,600 | $400,000 |
| Not exempt; finance fee | $0 | $408,600 |
| Exempt | $0 | $400,000 |
These figures address only the funding fee—not total cash to close. Your payment difference depends on the interest rate and loan term. Ask your loan officer or assistant to review both structures on your Loan Estimate, including cash needed, loan balance, and payment. For a Space Coast purchase, also leave room for homeowners insurance, property taxes, maintenance, and any applicable flood coverage.
On a VA purchase loan, financing the funding fee does not let you add every other closing cost to the loan. Our guide to which VA purchase costs can be financed explains the distinction. Review any permitted seller or lender credits with your loan officer rather than assuming that “zero down” means “zero cost.”
Can you get a refund if disability compensation is approved later?
A refund may be available if VA awards service-connected disability compensation after closing with an effective date before your loan closed. A later approval alone does not guarantee a refund: the effective date and your circumstances matter. A proposed or memorandum rating received after closing does not qualify you for a refund based on that rating.
Keep your award information and closing documents, and ask your lender, mortgage servicer, or VA regional loan center to review the dates. Follow the VA’s funding fee refund guidance. Do not build your closing plan around receiving money back later.
VA’s additional funding-fee guidance explains refund handling. An approved refund is paid directly to the Veteran or surviving spouse, including when the fee was financed; you may choose to use it to reduce your loan principal.
Three questions to ask before closing
Bring this checklist to your disclosure review:
- Have we verified whether I am exempt? Identify the applicable category and whether any records are still needed.
- If I am not exempt, what is my exact fee and why does that percentage apply? Confirm the loan type, prior use, down payment, and base loan amount.
- What changes if I finance the fee instead of paying it at closing? Review cash needed, loan balance, and monthly payment together.
Morgan Financial underwrites the file upfront. The underwriter identifies required items, and the processor collects those specific documents. This helps organize the review early; it does not guarantee an exemption, approval, or a closing date.
For more educational resources, explore the VA Home Loan Command Center. Use it to prepare questions about your benefit, then have your mortgage team verify the answers for your own file.
VA funding fee exemption FAQs
Do I need a 100% disability rating to be exempt?
No. Receiving VA compensation for a service-connected disability is one qualifying pathway; a 100% rating is not required. Other exemption categories also exist. Have your lender verify your actual status rather than relying on a percentage alone.
Does filing a disability claim make me exempt?
No. Filing alone does not establish the exemption. Qualifying compensation status or another applicable exemption must be verified. Discuss a pending claim early and report any new decision before closing.
Are all surviving spouses or Purple Heart recipients exempt?
No blanket assumption applies. The surviving-spouse category requires VA DIC. The Purple Heart category requires active-duty status and evidence of the award on or before closing. Another qualifying category may apply independently.
Can I be exempt when using a VA loan again?
Yes, if you meet an exemption at the time of the new loan. Prior use affects certain fee rates for non-exempt borrowers; it does not automatically cancel an exemption. Verify your status again for the new transaction.
Does Florida have a different funding fee waiver?
No. VA funding fee exemptions are federal. Florida property-tax benefits are separate, with their own eligibility and application requirements. A funding fee exemption does not establish eligibility for a property-tax exemption.
Does an exemption eliminate all closing costs?
No. It removes the VA funding fee, not every expense associated with buying or refinancing. Review the full Loan Estimate and Closing Disclosure with your loan officer or assistant.
Ready to check your funding fee exemption?
Reach out to Morgan Financial for help reviewing your COE, exemption documentation, and VA loan options. Our team serves Melbourne, Brevard County, the Space Coast, and homebuyers across Florida.
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This article is for educational purposes only and is not financial, legal, tax, or insurance advice or a commitment to lend. Loan approval, terms, and program eligibility depend on borrower, property, lender, and program requirements. Verify current requirements with a licensed mortgage professional and VA. Morgan Financial, NMLS 318525, is not affiliated with or endorsed by the U.S. Department of Veterans Affairs.
