"Can I Get the VA Funding Fee Refunded if My Disability Rating Came Through After Closing?"

The decision letter from VA arrives in March. You closed on the home in October, and at that closing you paid the VA funding fee because your disability claim was still working its way through the system. The letter grants a service-connected rating, and a few lines down it names an effective date. That effective date decides whether VA owes you the fee back, whatever the postmark on the envelope says.

Yes. If the effective date of your VA disability compensation falls on or before the day your loan closed, you were exempt from the funding fee as of that date, and VA refunds a fee an exempt veteran paid. You request it through your VA Regional Loan Center, because it does not start on its own. A rating effective after closing leaves the fee where it is.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, licensed in fifteen states, NMLS #483943, through C2 Financial Corporation. I work in a military town, between Parris Island, MCAS Beaufort and the Naval Hospital.

The effective date on your award letter decides it

VA's own handbook for lenders, VA Pamphlet 26-7, Chapter 8, Topic 8, revised November 8, 2012, lists who is exempt from the funding fee. The first group on the list is "Veterans receiving VA compensation for service-connected disabilities." The exemption follows your entitlement to that compensation, and a rating decision tells you two things: that you are entitled to it, and from what date. VA pays the compensation back to the effective date, and the exemption runs from that same date. So a rating granted in March with an effective date in September makes you a veteran who was exempt in October, the month you closed, even though nobody at the closing table could have known it.

VA's funding fee page says the same thing from your side of the table. You may be eligible for a refund if you are later awarded compensation for a service-connected disability, and the effective date of that compensation has to reach back to before your closing date. The same page says a rating that takes effect after closing does not earn a refund. In that case you were not exempt on the day the fee was charged, so the fee was charged correctly.

This situation is common enough that VA has gone looking for it on its own. In October 2019 VA announced it had reviewed 130,000 home loan files over the summer and sent more than $400 million back to veterans who had been charged a funding fee they did not owe. Some were clerical errors, and more of them, in VA's own description, were veterans whose exemption status changed because a disability rating was issued after the loan closed. VA also told lenders to ask about a pending disability claim during underwriting.

Who do I call about a VA funding fee refund?

Your situation at closing	Who you ask	What happens to the fee you paid
Your claim was pending, and the rating later came through with an effective date on or before your closing date	Your VA Regional Loan Center, at 877-827-3702 (TTY: 711)	VA refunds it once you ask for it.
Your claim was pending, and the rating later came through with an effective date after your closing date	There is no one to ask, because the fee stands on this loan.	You were not exempt on closing day, so the fee was charged correctly.
You were already receiving compensation on closing day and were charged the fee anyway	Your lender first, then the Regional Loan Center if the lender does not correct it	VA treats it as an overcharge and refunds it.
Your lender could not verify your exempt status in time and noted your claim in the closing package	VA reviews it on its own; call the Regional Loan Center if you hear nothing	VA determines your status and refunds the fee if you were exempt.
The fee was figured at the wrong rate, for example as a second use when it was your first	Your lender	The overpayment is refunded.

Every row in that table comes from Chapter 8, Topic 8 of VA's lender handbook and from VA's funding fee page, both linked above.

If your claim was still pending the day you closed

The handbook tells the lender exactly what to do with a pending claim. Topic 8 says: "If the veteran has a pending disability compensation claim at the time of loan closing, the funding fee must be remitted as if the [veteran] was not exempt." The lender collects the fee and sends it to VA through VA's own payment system within 15 calendar days of closing, which is why the refund has to come from VA rather than from your lender.

The same section gives the lender one more instruction: "Advise the veteran to contact the VA RLC to request a refund if it is later determined that the veteran is entitled to compensation retroactively to a date prior to loan closing." RLC is the Regional Loan Center. If nobody said that to you at closing, the instruction still applies to your file.

A rating the lender could not confirm in time gets slightly different handling. The handbook says the lender should "Indicate in the closing package that the veteran claims exempt status. VA will determine the [veteran's] status and refund the funding fee if appropriate." A call to the Regional Loan Center is still how you find out whether that review happened.

A proposed or memorandum rating counts too. The handbook lists veterans rated on a pre-discharge examination or a pre-discharge review of medical records among the exempt, and VA's funding fee page says a proposed or memorandum rating received before closing makes you exempt. A memorandum rating that arrives after closing follows the same effective date rule as any other rating.

How do I request a VA funding fee refund?

The refund does not appear on its own, so the steps below are yours to take. It usually comes down to two documents and one phone call.

1. You start with your closing date and the fee you paid. Both are on your Closing Disclosure, the settlement form you signed at closing, where the VA funding fee is listed with the loan costs.
2. You then find the effective date on your rating decision. Your decision letter from VA states the rating and the date it takes effect. Please keep the complete letter, all pages.
3. You compare the two dates. You were exempt on closing day only if the effective date falls on or before your closing date, so a later effective date leaves the fee where it is.
4. You call your VA Regional Loan Center at 877-827-3702, TTY 711. That is the number VA gives on its funding fee page for refund questions. It helps to have your loan number, your closing date, your Closing Disclosure and your decision letter in front of you.
5. You let your lender or servicer know as well. Your servicer is the company you send your monthly payment to. The handbook lets the lender make corrections through VA's funding fee payment system, so a call to the lender can get the refund moving from that side too.
6. You ask how the refund will be paid. The answer depends on how you paid the fee, which is the next section.

When you're ready, please provide me a copy of your rating decision letter, all pages, and your Closing Disclosure, all pages, please. I will tell you which row of the table you are in before you make the call.

Cash or financed: where the refund goes

Most veterans finance the funding fee rather than paying it at the table, and that changes the shape of the refund. Topic 8, subsection j of the handbook says a refund is appropriate when "an exempt veteran paid a funding fee, or a miscalculation of the fee caused an overpayment." It then splits the refund two ways.

If you paid the fee in cash, the handbook says you receive "a cash refund for the amount of the overpayment."

If the fee was added to your loan amount, the handbook says "the lender must apply the overpayment against the loan balance," and the lender has to show VA that it did. Your monthly payment does not change, because the payment was set when the loan was made. Your balance drops by the amount of the fee, you stop paying interest on that amount, and the loan pays off sooner. The Regional Loan Center can tell you how it will handle your own file when you call.

Mistakes that cost veterans this refund

Reading the date on the letter instead of the effective date in it. The letter is dated the day VA mailed it. The effective date is usually earlier, and it is the only date the refund rule cares about.

Waiting for the lender to handle it. The lender sent the fee to VA within 15 days of closing and may never hear about your rating. VA's own page tells you to call the Regional Loan Center.

Keeping the claim to yourself before closing. If your loan officer knows a claim is pending, the closing package can note it, which puts VA on notice from day one. Please tell me about any claim you have filed or plan to file, even one you expect to take a long time.

Paying the fee again on the next VA loan. Once you are receiving compensation, you are exempt on every later VA loan too, including a refinance. The lender verifies that with VA Form 26-8937, Verification of VA Benefits, and the handbook says the lender must have it in hand. The VA closing costs post covers the rest of the fees on that file, and how VA disability compensation counts as income covers the other side of the same award letter.

An example, with invented dates

Dates below are made up to show the mechanism, and nothing here is a real client.

Marcus separates from the Marine Corps in late August and files his disability claim the same month. He closes on a home in Beaufort County on October 14 with the claim still pending. The lender charges the funding fee, adds it to his loan amount, notes the pending claim in the closing package, and sends the fee to VA.

On March 3 the decision arrives. VA grants a rating with an effective date of September 1. September 1 is before October 14, so Marcus was exempt on the day he closed. He calls the Regional Loan Center with his loan number and his letter, and the refund is applied against his loan balance because the fee was financed. His payment stays the same while his balance goes down by the amount of the fee.

If you change one date, the answer changes. Suppose Marcus had not filed until November, after closing, and VA set the effective date of his compensation at November 20. November 20 is after October 14. He was not exempt on closing day, the fee was charged correctly, and there is no refund on this loan. He is exempt on his next VA loan, and on any VA refinance of this one.

Your next step

On this refund, the call is to VA, and I hope this page gives you the dates and the documents to make it a short one. On your next VA purchase or refinance, the call can be to me. You can run your numbers on the site first, with no credit pull and nobody calling you. Once you see pricing for your own scenario, you choose a rate option that works best for you, and that selection can change later.

The VA loan page covers entitlement, no down payment and no monthly mortgage insurance, and the VA funding fee page explains the fee itself and the exemption at closing. My South Carolina VA loan page covers what is different about a VA file here. If a move or a second home is in the picture, how a second VA loan works while you keep the first home and residual income on a VA loan are the two posts I would read next.

Nothing here is a loan approval, a denial, a commitment to lend, or legal advice. VA Pamphlet 26-7 and VA's own funding fee page are the authorities on the refund, and the Regional Loan Center makes the determination on your file. No letter from anyone is a loan commitment, and final approval on any new loan depends on the property, the appraisal and full underwriting.

Common questions

Can I get a VA funding fee refund if my disability rating came after closing?

Yes, if the effective date of your compensation is on or before your closing date. VA's funding fee page says you may be eligible for a refund when you are later awarded compensation for a service-connected disability with an effective date before your loan closing. The date on the decision letter itself does not matter, and a rating that takes effect after closing does not qualify for a refund on that loan.

Who do I call to request a VA funding fee refund?

You call your VA Regional Loan Center at 877-827-3702, TTY 711, which is the number VA prints on its funding fee page for refund questions. It helps to have your loan number, your closing date, your Closing Disclosure and your complete rating decision letter in front of you. It also helps to tell your lender or servicer, because VA's lender handbook lets the lender submit corrections through VA's funding fee payment system.

Is the VA funding fee refunded if my claim was pending when I closed?

It can be, once the claim is decided. VA Pamphlet 26-7, Chapter 8, Topic 8 tells the lender to collect the fee when a claim is pending. It also tells the lender to advise you to contact the Regional Loan Center for a refund if VA later finds you entitled to compensation retroactive to a date before closing. The refund depends on the effective date VA assigns, and you have to request it.

Does the refund come as a check if I financed the funding fee?

Under VA's lender handbook, a veteran who paid the fee in cash receives a cash refund, and a veteran whose fee was added to the loan amount has the overpayment applied against the loan balance. Your payment stays the same and your balance drops. When you call, the Regional Loan Center can tell you how it will handle your particular loan.