What is the VA funding fee, and who is exempt?
The VA funding fee is a one-time fee paid to the VA on most VA-guaranteed home loans, charged as a percentage of the loan amount. Veterans receiving VA compensation for a service-connected disability are exempt, as are several other groups. Exemption is documented with VA Form 26-8937, a current award letter, or a Veteran Service Center Manager letter.
What the fee is and why it exists
The VA does not lend money. It guarantees a portion of a loan made by a private lender, and that guaranty is what lets the program operate without mortgage insurance and, for a veteran with full entitlement, without a VA-imposed loan limit. The VA guaranty does not exceed 25% of the loan (U.S. Department of Veterans Affairs).
The funding fee is what keeps that guaranty funded. It is charged as a percentage of the loan amount, paid once, and it goes to the VA rather than to the lender. It is the reason the program can run without the ongoing monthly mortgage insurance that conventional and FHA borrowers carry.
The percentage is not one number. It varies by the type of loan, whether the borrower has used the VA benefit before, and how much is put down. Because those percentages are periodically revised, get the figure that applies to your file from your lender at application rather than from an article.
Who is exempt
The exemptions published by the VA include (U.S. Department of Veterans Affairs):
- Veterans receiving VA compensation for a service-connected disability.
- Veterans who are eligible to receive that compensation but are receiving retirement pay or active-duty pay instead.
- Certain recipients of Dependency and Indemnity Compensation (DIC).
- Purple Heart recipients who are still serving on active duty.
The second one is the category that gets missed. A veteran who has been found eligible for compensation but elected retirement pay in its place can still be exempt, even though no compensation check arrives each month. Borrowers in that position frequently assume the exemption does not apply to them and pay a fee they did not owe. Raise it with the loan officer at application and let the VA's records settle it.
The exemption is a meaningful number on a real purchase. On any loan large enough to be interesting, a percentage of the loan amount is not a rounding error, and it is cash or financed principal that an exempt borrower simply does not carry.
How exemption is documented
The VA accepts any of the following as evidence:
- VA Form 26-8937, Verification of VA Benefits.
- A current VA award letter, dated within the last 12 months.
- A letter from a Veteran Service Center Manager.
(U.S. Department of Veterans Affairs)
The date requirement on the award letter is the practical trap. An award letter from four years ago in a filing cabinet does not satisfy it. A current letter can usually be generated through the VA's benefit letters portal, but do it at the start of the file rather than the week of closing — the closing disclosure has to reflect the exemption, and correcting it late means redrawing documents and can push the closing date.
What to do if the fee was charged and you were exempt
Exemption status is sometimes established or corrected after the loan closes. A veteran whose disability rating is granted with an effective date preceding the loan closing may be entitled to a refund of a funding fee already paid. That is a VA and lender question, handled through the loan servicer and the VA, and the effective date of the rating is the fact that drives it. Bring the rating decision and the closing documents to both.
The Texas layer worth knowing about separately
The VA funding fee exemption is federal and applies to the loan. Texas separately exempts part or all of a disabled veteran's property taxes, and the two are unrelated — being exempt from one does not automatically do anything about the other.
Under Texas Tax Code §11.22, a disabled veteran gets a fixed dollar exemption off the appraised value of one property, tiered by VA disability rating: $5,000 for a rating of at least 10 percent but less than 30, $7,500 for at least 30 but less than 50, $10,000 for at least 50 but less than 70, and $12,000 at 70 percent or more (Texas Tax Code §11.22(a)). It applies to one property the veteran designates. The partial exemption application is Form 50-135, filed with the appraisal district — Kendall Appraisal District for a Boerne property.
Under Texas Tax Code §11.131, a veteran with a 100% disability rating or a determination of individual unemployability — either one qualifies, not both — may receive a total exemption of the total appraised value of the residence homestead. The application is Form 50-114, due April 30, though it may be filed up to five years after the delinquency date. A surviving spouse qualifies if they have not remarried, the property was their homestead at the veteran's death, and it remains their homestead; if the spouse later moves, the exemption is capped at the dollar value of the last year's exemption on the prior home, not carried over in full (Texas Comptroller).
For a property in Boerne or anywhere in Kendall County, that filing goes to the Kendall Appraisal District — not Bexar CAD. Boerne is in Kendall County, not the City of San Antonio.
Who to ask
Funding fee percentages, exemption status on your file, entitlement and refund requests are lender and VA questions, and the lender pulls the VA's records as part of the file. Property tax exemption amounts, applications and deadlines go to the Kendall Appraisal District for a Kendall County property. Anything involving how title is held, surviving spouse status or estate matters is for a Texas real estate attorney.
Related questions
- Conventional vs. FHA vs. VA loan in Texas: which one?
- What are the 2026 conforming and FHA loan limits in Kendall County, Texas?
- What is the Texas disabled veteran property tax exemption?
- How much down payment do I need to buy a house in Texas?
- What credit score do I need to buy a house in Texas?
Questions about a specific property?
Heath Shepard is a 100% disabled veteran and a licensed Texas REALTOR. If VA benefits or the disabled-veteran exemption are part of your purchase, say so up front and he’ll factor them into the numbers.
Call or text 830-446-3847 · Email heath.shepard@kw.com
This page explains the VA funding fee and its exemptions. It is not lending or tax advice. Your lender and the VA determine exemption status on your loan; the Kendall Appraisal District handles Texas property tax exemptions.