VA Loan Benefits for Disabled Veterans: Funding Fee Exemption and More

TL;DR: Disabled veterans (10%+ VA rating) get significant VA loan benefits: NO funding fee (saves $6,000-15,000), property tax exemptions (varies by state—some offer 100% exemption), VA Specially Adapted Housing (SAH) grants up to $109,986 for 100% disabled, and priority processing. File disability claims BEFORE buying—retroactive rating can get funding fee refunded.

Key Statistics:

• Funding fee exemption: 10%+ VA disability rating
• Typical funding fee savings: $6,000-15,000
• SAH grant maximum (2024): $109,986
• SHA grant maximum (2024): $22,036
• Property tax exemption: Varies by state (up to 100%)

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Additional Benefits for Disabled Veterans

If you have a service-connected disability, the VA loan program offers enhanced benefits beyond what's available to all veterans. These aren't extras – they're recognition that your service came with a cost, and the nation owes you additional support.

Let me explain what you're entitled to and how to access it.

The Funding Fee Exemption

This is the biggest financial benefit for disabled veterans.

Who's exempt:

• Veterans with a VA disability rating of 10% or higher
• Veterans receiving VA compensation for service-connected disabilities
• Purple Heart recipients on active duty
• Surviving spouses of veterans who died in service or from service-connected conditions

What it saves:

The funding fee normally ranges from 1.25% to 3.3% of the loan amount. On a $400,000 loan:

• First use, 0% down: $8,600 saved (2.15%)
• Subsequent use, 0% down: $13,200 saved (3.3%)

Over a military career with multiple VA loans, this exemption can save tens of thousands of dollars.

How it works:

Your lender verifies your disability status through VA systems. If you're rated 10% or higher, the fee is waived automatically. You don't need to do anything special – just ensure your disability rating is current and accurate.

How the Exemption Gets Applied

If your rating is established before closing:

The exemption applies automatically. No funding fee is charged.

If your claim is pending at closing:

You'll pay the funding fee at closing. When your claim is approved with an effective date BEFORE your closing date, you can apply for a refund.

How to get a refund:

1. Obtain documentation of your disability rating and effective date
2. Submit to your lender or servicer
3. They'll process the refund through the VA
4. The refund goes to you (or reduces your loan balance)

Timeline tip: If you have a pending disability claim and are buying a home, let your lender know. They can help coordinate the refund process if your claim is approved retroactively.

Specially Adapted Housing Grants

For veterans with severe service-connected disabilities, the VA offers grants to adapt homes for accessibility:

Specially Adapted Housing (SAH) Grant

For veterans with:

• Loss or loss of use of both legs
• Loss or loss of use of one leg with residuals from organic disease or injury
• Blindness in both eyes (with certain conditions)
• Loss or loss of use of both arms
• Severe burns

Grant amount (2024): Up to $117,014

What it covers:

• Building an adapted home
• Buying an already-adapted home
• Adapting a home you currently own

Special Housing Adaptation (SHA) Grant

For veterans with:

• Blindness in both eyes with 20/200 visual acuity or less
• Loss or loss of use of both hands
• Severe burn injuries
• Certain respiratory injuries

Grant amount (2024): Up to $23,444

What it covers:

• Adapting a home you own
• Adapting a home you'll buy

Temporary Residence Adaptation (TRA) Grant

For veterans who qualify for SAH or SHA but are living temporarily in a family member's home.

Grant amounts (2024):

• Up to $47,130 for SAH-eligible veterans
• Up to $8,415 for SHA-eligible veterans

What it covers:

• Adapting the family member's home for the veteran's needs

Using Grants With VA Loans

These grants can work alongside VA loans:

Building a new home:

1. Get VA construction loan approved
2. Apply for SAH/SHA grant
3. Use grant funds for adaptive features
4. VA loan covers the rest

Buying an existing home:

1. Find a home (may need modifications)
2. Use VA loan for purchase
3. Apply grant funds for adaptations

Adapting a current home:

1. If you have a VA loan, refinance or get home equity loan for any costs beyond grant
2. Use grant for specific adaptive modifications

Residual Income Considerations

VA disability income is stable, tax-free income that helps you qualify for a larger loan:

How it helps:

• VA disability compensation counts as qualifying income
• Because it's tax-free, lenders may "gross it up" by 25% (count it as worth more than face value)
• It's considered highly stable income (won't fluctuate like employment income)

Example:

$2,000/month VA disability compensation might be counted as $2,500/month for qualification purposes, increasing your buying power.

Credit and Disability

Having a disability doesn't directly affect your credit score or loan approval. However, the financial stability from VA compensation can indirectly help:

Positive factors:

• Steady monthly income
• No risk of layoff or job loss on that income
• Often combined with military retirement for multiple stable income sources

If your disability affected your credit:

Some veterans' credit suffered due to circumstances related to their disability or transition. The VA's flexible credit guidelines help:

• No VA minimum credit score
• Manual underwriting considers full picture
• Extenuating circumstances can be documented

At Cornerstone, we underwrite to VA guidelines without adding credit overlays, which particularly helps disabled veterans rebuilding credit.

Applying for Disability Benefits

If you haven't applied for VA disability benefits, consider doing so before buying:

Benefits of having your rating established:

• Funding fee exemption saves thousands
• Disability income helps you qualify
• Grants may become available

How to apply:

1. File a claim through VA.gov or with a Veterans Service Organization (VSO)
2. Gather medical evidence and service records
3. Attend any required exams
4. Wait for rating decision

Timeline reality: Disability claims can take months. If you're buying soon, you might close before your claim is decided. Remember: if approved retroactively, you can get your funding fee refunded.

Working With Service Organizations

Veterans Service Organizations (VSOs) can help with disability claims and housing benefits:

Free claim assistance:

• DAV (Disabled American Veterans)
• VFW (Veterans of Foreign Wars)
• American Legion
• Paralyzed Veterans of America

Housing resources:

• Homes for Our Troops (builds adapted homes for severely injured veterans)
• Building Homes for Heroes
• State veteran housing programs

These organizations understand both the disability and housing systems and can help coordinate benefits.

Mental Health Conditions and VA Loans

PTSD, anxiety, depression, and other mental health conditions can qualify for VA disability ratings:

Relevant to VA loans:

• Ratings of 10%+ exempt you from the funding fee
• The income helps you qualify
• The condition itself doesn't affect loan eligibility

Privacy:

Lenders see that you're exempt from the funding fee. They don't see your specific conditions. Your medical privacy is protected.

If mental health affected your finances:

Mental health challenges during transition or treatment can impact credit and financial stability. VA loans' flexible guidelines and our no-overlay approach give you room to qualify as you recover.

Multiple Disabilities

Veterans often have multiple service-connected conditions:

Combined ratings:

The VA uses "combined" math (not simple addition) to calculate your overall rating. A 50% and 30% rating combine to about 65%, not 80%.

For funding fee exemption:

You only need 10% combined rating. Whether you have one 10% condition or multiple conditions combining to 10%+, you're exempt.

For housing grants:

Specific conditions qualify for SAH/SHA. Having other disabilities in addition doesn't affect grant eligibility for the qualifying condition.

Concurrent Receipt Considerations

Some veterans receive both military retirement pay and VA disability compensation:

CRDP (Concurrent Retirement and Disability Pay):

Veterans with 50%+ disability rating can receive full retirement AND disability pay.

CRSC (Combat-Related Special Compensation):

For combat-related disabilities, even below 50% rating.

For VA loans:

Both retirement pay and disability compensation count as qualifying income. This combined income often provides strong buying power.

Frequently Asked Questions

Do I need 100% disability for the funding fee exemption?

No. 10% or higher qualifies you for full exemption.

What if my rating changes after I get my loan?

A new rating doesn't affect your existing loan. For future loans, your current rating at that time applies.

Can I get the SAH grant more than once?

Yes, if you haven't used your full entitlement. Grants can be used across multiple homes up to the maximum amount.

Does the funding fee exemption apply to refinancing?

Yes. Both IRRRL and cash-out refinances are funding fee exempt for disabled veterans.

What if I'm rated temporary vs. permanent?

Both count for the funding fee exemption. Permanent ratings are more stable for long-term planning, but temporary ratings still qualify.

Can my disability rating help if I have bad credit?

The rating itself doesn't fix credit. But the stable income from VA compensation can help you qualify despite credit challenges.

The Respectful Approach

Let me address something directly: these benefits exist because of your sacrifice. You're not taking advantage of anything or getting special favors. These programs recognize that service-connected disabilities are a cost of serving your country.

Using these benefits is appropriate, reasonable, and what they're designed for. Don't let anyone make you feel otherwise.

Planning Your Home Purchase

If you're a disabled veteran planning to buy:

Before you start:

• Confirm your disability rating is current and accurate
• Consider filing any pending claims (for funding fee exemption)
• Research SAH/SHA grants if you have qualifying conditions
• Gather income documentation including VA compensation letters

During the process:

• Work with a VA loan specialist who understands disabled veteran benefits
• Ensure your funding fee exemption is properly applied
• Discuss any accessibility needs with your real estate agent
• Consider future needs as well as current ones

After closing:

• Keep documentation of your disability status
• Consider adaptive modifications (grants may help)
• Stay connected with VSOs for ongoing support

Working With Cornerstone

At Cornerstone First Mortgage, we serve disabled veterans with the respect you've earned:

Funding fee exemption: We verify automatically and ensure it's properly applied.

Understanding: Our team understands VA disability and how it affects financing.

Flexibility: No credit overlays means we work with veterans others turn away.

Coordination: We can help coordinate with grant programs when applicable.

Patience: We understand that disability can affect timelines. We work with you.

Your service matters. Your disability doesn't diminish your service – if anything, it demonstrates the cost of your commitment. We're honored to help you access homeownership.

Additional Resources

VA disability claims:

va.gov/disability

SAH/SHA grants:

va.gov/housing-assistance/disability-housing-grants

VSO directory:

va.gov/vso

Homes for Our Troops:

hfotusa.org

State veteran benefits:

Check your state's department of veterans affairs for additional programs.

You've given enough. It's time to receive what you've earned.