Buying a Home as a Veteran: VA Loan Basics, the Funding Fee, and Property Tax Relief
Last verified: October 2026 · Part of our "Benefits by Life Situation" series
Disclaimer: This guide is general information, not legal, tax, financial or lending advice, and it is not advice about any VA claim. We are an independent site and are not affiliated with, endorsed by, or operated by the U.S. Department of Veterans Affairs (VA), any lender or any state agency. We don't recommend lenders. Rules and rates change. Always confirm with the official source linked next to each fact.
The short version
- The VA home loan program doesn't require a down payment or monthly mortgage insurance (VA: funding fee and closing costs).
- Most borrowers pay a one-time VA funding fee, but many veterans with a service-connected disability are exempt. Timing matters, especially if you're still in service.
- Property tax relief for disabled veterans comes from your state and county, not from VA, and it varies enormously.
Part 1: VA home loan basics
Who's eligible, and how you prove it
Eligibility depends on your service history. VA explains the requirements on its eligibility page (VA: eligibility for VA home loan programs).
You prove eligibility with a Certificate of Eligibility (COE). VA says you can request one online, through your lender, or by mail using VA Form 26-1880 (VA: how to request a COE).
Is there a loan limit?
If you have full entitlement, VA says: "You don't have a loan limit (as long as you can afford the loan amount and the property appraisal supports the purchase price of the home)" (VA: home loan entitlement and limits). Two catches from that same page:
- If you've already used part of your entitlement, county loan limits come into play.
- Even with full entitlement, your lender still has to approve you.
Who sets your interest rate?
Your lender does, not VA. VA says your lender determines your interest rate, discount points and other closing costs, and that "these details may vary from lender to lender" (VA funding fee page). That's why comparing Loan Estimates from more than one lender is worth your time.
Part 2: The VA funding fee
What it is
VA describes it as "a one-time payment that the Veteran, service member, or survivor pays on a VA-backed or VA direct home loan." It helps lower the program's cost to taxpayers (VA funding fee page).
✅ You don't pay the funding fee if any of these are true
Per VA (same page):
- You're receiving VA compensation for a service-connected disability
- You're eligible for VA compensation for a service-connected disability but receive retirement or active-duty pay instead
- You're a surviving spouse receiving Dependency and Indemnity Compensation (DIC)
- You're a service member with a proposed or memorandum rating before the loan closing date saying you're eligible for compensation from a pre-discharge claim
- You're on active duty and, on or before closing, you provide evidence you received a Purple Heart
⏰ The timing trap (read this if you're still in service)
- A pending claim isn't an exemption. VA's guidance to lenders says that if a proposed or memorandum rating isn't obtained and the loan closes before discharge, "the funding fee exemption does not apply, and the Service member will not be entitled to a refund" (VA Circular 26-22-12).
- A rating after closing doesn't earn a refund. VA's consumer page says: "If you get a proposed or memorandum rating after your loan closing date, you'll still need to pay the funding fee. You won't be eligible for a refund based on this rating" (VA funding fee page).
- Ask for an updated COE. If you have a pending claim, VA tells lenders to request an updated COE before closing, "preferably not more than five days before closing" (VA Circular 26-21-11).
👉 Pre-discharge (BDD) claims are covered in Guide 4: Separating / Transitioning . For help with a claim itself, see "Get individual help" below.
Refunds
VA says you may be eligible for a refund "if you're later awarded VA compensation for a service-connected disability. The effective date of your VA compensation must be retroactive to before the date of your loan closing." VA directs you to your VA regional loan center for refunds (VA funding fee page).
How much is it? (rates effective April 7, 2023)
For purchase and construction loans (Veterans, active duty, Guard and Reserve), from VA's rate chart:
| Down payment | First use | After first use |
|---|---|---|
| Less than 5% | 2.15% | 3.3% |
| 5% or more | 1.5% | 1.5% |
| 10% or more | 1.25% | 1.25% |
Other loan types, from the same chart:
| Loan type | Funding fee |
|---|---|
| Cash-out refinance | 2.15% first use / 3.3% after |
| Interest Rate Reduction Refinance Loan (IRRRL) | 0.5% |
| Loan assumption | 0.5% |
| Manufactured home (not permanently affixed) | 1% |
| Native American Direct Loan | 1.25% purchase / 0.5% refinance |
Source: VA funding fee page (page last updated Oct 5, 2026).
VA's example: a first-time user buying a $200,000 home with $10,000 (5%) down pays 1.5% of the $190,000 loan, which is $2,850 (same page).
Paying it, and closing costs
- You can finance the funding fee into the loan or pay it at closing.
- On a purchase loan, VA says you can finance only the funding fee; "You must pay all other fees and charges when your loan closes."
- Sellers can help. VA limits seller's concessions to no more than 4% of the home's reasonable value. It doesn't limit seller credits for the loan's closing costs.
Source for all three points: VA funding fee page.
Part 3: Property tax relief for disabled veterans
This comes from your state and county, and it varies a lot. Examples from our starter states (each checked against an official source in October 2026):
| State | What it looks like | Official source |
|---|---|---|
| Texas | Graduated $5,000–$12,000 of value by rating band (10%+), plus a separate full homestead exemption at 100% or IU paid at 100% | TX Comptroller FAQ; Office of the TX Governor |
| Florida | Full homestead exemption for service-connected total and permanent disability; $5,000 reduction at 10%+ | FL Dept. of Revenue PT-109 |
| Virginia | Full exemption on the principal residence for 100% service-connected P&T; no application deadline, but refunds limited to the current year plus up to 3 prior years | Va. Code § 58.1-3219.5; 1VAC80-10 |
| Arizona | Primary residence fully exempt at 100% service-connected or TDIU; lower ratings get a partial exemption ($4,188 × rating %); file with the county assessor | A.R.S. 42-11111 |
| North Carolina | Excludes the first $45,000 of assessed value (100% P&T or specially adapted housing); due June 1 | NC DMVA |
| Georgia | $126,526 homestead exemption for tax year 2026 for qualifying disabled veterans | GA DOR memo (via Fulton County) |
| California | 2026 exemption $180,671 basic / $271,009 low-income (100% or IU) | CA BOE; BOE LTA 2025/014 |
| Washington | Income-based exemption at 80%+ or paid at 100% | WA Dept. of Revenue |
| Ohio | Enhanced homestead exemption at 100% or IU paid at 100%; file with the county auditor by Dec 31 | Ohio DTE 105I |
| Pennsylvania | Need-based exemption (100%, TDIU, or listed conditions; wartime service); need presumed at income of $114,637 or less | PA DMVA |
Tip: many states let you apply before you close or as soon as you own the home. Florida, for example, lets eligible veterans apply before they receive their VA documentation, with the exemption effective from the original application date once the paperwork arrives (FL PT-109). Ask your county.
✅ Questions to ask any lender (neutral checklist)
- "Will you request an updated COE before closing to confirm my funding fee status?"
- "Can I see a Loan Estimate with and without discount points?"
- "What are your lender fees, itemized?"
- "Is any seller credit being applied, and how?"
- "If I'm exempt from the funding fee, can you confirm it isn't being financed into my loan?" (VA has warned lenders not to advise potentially exempt borrowers to finance the fee: Circular 26-21-11.)
Free housing counseling
HUD-approved housing counseling agencies offer advice on buying, renting, credit and more. Find one at 800-569-4287 or through HUD's online search (HUD: housing counseling).
Get individual help (free, accredited)
This guide is general information. For help with anything about your own VA benefits or claims, talk to someone accredited by VA.
- Find a VA-accredited representative or Veterans Service Organization (VSO). VSO representatives help for free. VA's official page explains your options and links to its accreditation search (VA: get help from an accredited representative or VSO).
- Check that anyone helping you is accredited. VA's Office of General Counsel explains that without accreditation, a person "may not independently assist claimants in the preparation, presentation, and prosecution of claims for VA benefits" (VA OGC: Accreditation FAQs).
- Your state's veterans affairs department (directory via NASDVA) can explain state benefits and point you to local help.
We do not help with VA claims, ratings or appeals, we don't recommend lenders, and we never charge veterans for information.
Keep going
- Guide 1: Moving to a New State : compare state benefits before you buy
- Guide 3: Kids, Spouse & College
- Guide 4: Separating / Transitioning From Service : pre-discharge claims and funding fee timing
- Guide 5: Turning 65 / Aging
- State Benefit Change Tracker : property tax changes by state
Last verified: October 2026. Found something out of date? Tell us (placeholder).