The VA funding fee refund can be a significant financial boost for eligible veterans. It might seem confusing, but understanding the process makes a difference. This post addresses common questions with clear answers. You can learn more about the loan benefit you have earned.
Table of Contents:
- Understanding the VA Funding Fee
- How VA Funding Fee Refunds Work
- The Refund Process: Step-by-Step
- Maximizing Your Chances of a Refund
- Key Considerations
- Don’t Leave Money on the Table
- Conclusion
Understanding the VA Funding Fee
The VA funding fee is a one-time payment that lowers the cost of VA loans for taxpayers. It offsets the VA loan program costs. This fee is usually included in the loan, increasing the financed amount.
While it’s an added expense, VA loan benefits, like no down payment, often outweigh this fee. Think about whether the fee rates are worth it for your situation.
Who Is Exempt from the VA Funding Fee?
Some veterans are exempt from this fee, including those receiving VA disability compensation. Surviving spouses of veterans who died from a service-connected disability and receive Dependency and Indemnity Compensation (DIC) are also exempt.
Purple Heart recipients and service members with a pre-discharge disability rating may also qualify. See VA Circular 26-23-19 for exemption details. Learn about loan assumptions as well as how this impacts surviving spouses.
How VA Funding Fee Refunds Work
Even if you initially pay the VA funding fee, you might get a refund later. This happens when a veteran’s disability rating is awarded after closing with an effective date before closing.
The VA realizes they shouldn’t have collected the funding fee loan. They will issue a refund for any funding fee purchase you have made.
Common Scenarios for Refunds
The most common scenario involves veterans receiving a retroactive disability rating. Imagine closing on a VA loan and then filing a disability claim. This could qualify you for a VA funding fee refund.
If awarded with an effective date before your closing date, a refund is due. This also applies to service members with pending pre-discharge claims and a retroactive effective date. This may help if you are part of the national guard.
Real-Life Example: A Veteran’s Refund Journey
A Marine veteran in Salem was refinancing a large loan with a hefty funding fee. He expected a VA disability claim approval. He proceeded with the refinance, keeping the loan closing costs in mind.
Months later, rated 70% disabled, he received a $25,600 VA refund check. This resulted from his retroactive effective date.
The Refund Process: Step-by-Step
Gather your loan documents and disability rating information. This paperwork verifies your situation.
- Contact Your Lender or Servicer: They’re a good resource for refund procedures and required documents. They handle fee correction and refund requests via the VA Funding Fee Payment System (FFPS). VA Circular 26-23-19 offers more guidance.
- Contact the VA Directly: Contact the VA Regional Loan Center for guidance. They assist with refund inquiries and document requirements. For more questions, check with your regional loan center.
Processing times vary; stay in contact with the appropriate agency. Make sure you follow through so that you can get your fee purchase refunded.
Maximizing Your Chances of a Refund
Timely action is crucial for a VA funding fee refund. Apply for your disability claim before your loan closes or refinance. You may also consider a cash-out refinance if eligible.
The claim date or intent to file date is important. It sets the disability approval effective date, simplifying things. Understand the memorandum rating for yourself.
Key Considerations
Don’t delay buying or refinancing solely for a refund. VA disability evaluations and awards can be unpredictable. This isn’t an assumption to result in a refund for the lender charge. This is the same for construction loans or a VA loan.
Pursue your disability claim because your finances shouldn’t depend on rating timing. Seek an updated Certificate of Eligibility (COE) before closing. Think about your next loan refinance as well.
If a lender made loan errors, a fee correction goes directly to them. Your mortgage insurance and loan pay should be accounted for by the VA lenders.
Don’t Leave Money on the Table
This may seem complicated, but refunds are straightforward if you meet requirements. Be prepared and stay informed. Successfully claim funds that are rightfully yours. Understand that VA funding fee rates are not static.
Conclusion
A VA funding fee refund is often possible. Grasp the rules, be organized, and stay informed to secure your refund. You can possibly reclaim some of your VA funding costs.
This guide simplified how refunds are possible and accessible. Now informed, retrieve significant money owed to you. Learn about how discount points can be used as well. Be sure to learn the requirements so that you know the type VA loan you qualify for. Consider whether rate reduction refinancing loans make sense for you.
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