Did you know there are additional VA home loan benefits for qualifying disabled veterans? Knowing the VA offers additional consideration for qualified veterans in this area can save a great deal of money and allow for the purchase of a dream home.
Disabled Veteran Loan Benefits
1. VA Loan Funding Fee Exemption
Any qualifying veteran who receives or is eligible to receive VA compensation for service-connected medical conditions, disabilities, or related issues (as determined by the VA) is exempt from paying the otherwise-mandatory VA loan funding fee. Typically this can translate to thousands in savings. See below for more information on funding fee exemption.
Changes to the VA loan program that began effective January 1, 2020 also make active duty Purple Heart recipients eligible for a VA loan funding fee waiver. For these service members, it’s required to turn in proof of active duty status and documentation of the Purple Heart award prior to closing time.
2. State Property Tax Exemptions
Most states offer some form of property tax break for those with qualifying disabilities. These tax breaks will vary from state to state, as well as the eligibility criteria for them.
3. Counting VA Disability Income
A VA-approved lender still needs to see steady income prior to approval and fortunately VA disability income can be counted towards meeting this requirement.
4. Specially Adapted Housing Grant (SAH)
The VA SAH grant is for qualifying disabled veterans who own their home or for homes owned by an “eligible individual” and assists with living independently in a barrier-free environment.
5. VA Special Housing Adaptation Grant (SHA)
SHA grants are available for veterans who have qualifying service-connected disabilities to help adapt or purchase a home to accommodate the disability.
6. VA Home Improvements and Structural Alterations (HISA) Grant
VA HISA Grants are intended for any disabled veteran with a documented medical need for alterations or modifications to a primary residence to make it more accessible. HISA Grants must be accompanied by a statement from a physician diagnosing and approving the modifications.
7. VA Temporary Residence Adaptation (TRA) Grant
The VA TRA Grant is meant for veterans who need funds to temporarily modify a relative’s residence to make it more accessible. Those who qualify for the VA SAH and VA SHA Grants mentioned above also qualify for some form of TRA assistance.
8. Mortgage Credit Certificate (MCC) Program
With a VA loan the MCC tax credit is a federal credit which can reduce potential federal income tax liability for lower-income families, creating additional net spendable income which first time home borrowers may use toward their monthly mortgage payment. State and local Housing Authorities administer the MCC program.
What Is The VA Loan Funding Fee?
The VA Loan Funding Fee is an up-front payment that is a typical expense of buying a home with a VA mortgage. The funding fee is calculated based on the amount of the home loan. It may be paid entirely in cash or financed into the loan.
The VA Loan Funding Fee is required of all non-exempt borrowers, and is calculated based on a variety of factors including whether the borrower is a first-time user, whether the borrower is making a down payment, and whether the borrower is active duty, or a member of the Guard/Reserve. The VA loan funding fee is lower for those who choose to make a down payment.
The funding fee structure was revised effective January 1, 2020. The VA loan funding fee for forward loans is lowest for first-time VA loan borrowers who choose to make a down payment of at least 10%.
For VA mortgages, usually no down payment is required. However if you choose to make one, you get the added benefit in lower VA loan funding fees.
The fee is based on the following scale:
- First-time use with no money down – 2.3%
- 5 percent down – 1.65%
- 10 percent down – 1.4%
Second-time use VA loan funding fees are as follows:
- First-time use with no money down – 3.6%
- 5 percent down – 1.65%
- 10 percent down – 1.4%
The VA funding fee is not applicable to qualifying disabled veterans who receive or are eligible to receive VA compensation for service-related medical issues. This exemption is available when your VA records reflect your status as a disabled veteran and the information has been added to your VA Certificate of Eligibility for a VA mortgage.
As mentioned earlier in this article, certain active duty Purple Heart recipients may also qualify for the VA loan funding fee exemption, but proof of the Purple Heart must be furnished before loan closing.
It is the lender’s job to ensure that your current official status is noted for the purpose of processing your VA mortgage and determining whether you must pay the VA loan funding fee.
The VA official site requires your participating VA lender to verify exempt status using one of the following forms of documentation:
• VA Form 26-8937 Verification of VA Benefits, showing the borrower’s exempt status
• For those who accepted service retirement pay instead of VA compensation, a copy of the original VA notification of disability rating and documentation of the veteran’s service retirement income
• Indications on the borrower’s Certificate of Eligibility (COE) that the borrower is entitled to an exemption
Are You Currently Exempt From Paying The VA Loan Funding Fee?
There is a quick way to see if you are currently “on the record” as being exempt from having to pay the VA loan funding fee; when you apply for your VA loan Certificate of Eligibility (VA COE) there is a section of the COE titled “Funding Fee Status” which will show the borrower’s status.
Those who have “Exempt” in this column will not have to pay the VA loan funding fee. If your records have not yet been updated to show your exempt status, you will need to discuss your circumstances with the lender to see what may be acceptable. Again, the funding fee payment is required from those who cannot have their VA-rated disability verified before loan closing (or any other deadline as determined by the lender). The borrower is responsible for seeking a refund once disability status is updated in the VA record.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News