VA Loan Articles
VA Interest Rate Reduction Refinance Loan ProgramHere's a frequently asked question about VA refinancing loans: "Is there always a VA funding fee with the IRRRL loan?"
The VA Interest Rate Reduction Refinance Loan program (abbreviated as VA IRRRL) does require a VA loan funding fee. That fee is lower than for new purchase VA home loans and your lender can help you when it comes to specific amounts that would be required depending on the loan, but you should know that VA IRRRL funding fees are lower. They are also always required unless the borrower is otherwise exempt from paying the fee.
The rules for VA loan funding fee exemptions are described in VA Pamphlet 26-7, Chapter Eight. It contains a list of those who are exempt from having to pay the VA loan funding fee, regardless of the type of home loan you seek.
Borrowers eligible for a VA loan funding fee exemption should not assume they are automatically exempt from paying-the borrower and lender must work together to get the exemption from the VA. According to Chapter Eight:
"The following persons are exempt from paying the funding fee:
Veterans receiving VA compensation for service-connected disabilities.
Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay.
Veterans who are rated by VA as eligible to receive compensation as a result of pre-discharge disability examination and rating or on the basis of a pre-discharge review of existing medical evidence (including service medical and treatment records) that results in issuance of a memorandum rating.
Veterans entitled to receive compensation, but who are not presently in receipt because they are on active duty.
Surviving spouses of veterans who died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan)."
How do you get a VA funding fee exemption? The lender must verify the borrower's exempt status by having the borrower fill out VA Form 26-8937, Verification of VA Benefits, indicating the borrower's exempt status. This paperwork must be turned in to and processed by the Department of Veterans Affairs. Depending on the circumstances, it may not always possible to get the exemption approved in time for the loan closing date--in such cases the borrower would pay the fee up front and apply for a refund once exempt status is official.