VA Loans Fees, Refunds, And You

Does the Department of Veterans Affairs owe you a VA Loan Funding Fee refund? If you had a disability claim pending with the VA at the time of your home loan and you were not yet officially recognized as receiving or being eligible to receive VA benefits, you may be owed your VA loan funding fee back as a refund.

According to the VA official site, any eligible veteran who receives or is eligible to receive VA disability benefits is also able to apply for a VA loan funding fee exemption. This can save the applicant thousands of dollars, but the exemption is not automatic. It must be applied for and the borrower may be required to pay the VA loan funding fee up front and get his or her refund later.

Some borrowers find their VA loan claims taking much longer to process than the house hunting process. In finding a home, making the offer, and closing the deal before the government can verify the VA disability claims, the timing might not match the VA’s processing of your disability claim.

Getting the refund might not be the issue—the way that refund is paid out can be, however. Some VA borrowers expect to be paid cash for their VA loan funding fee, but this is not a safe assumption to make. It all depends on how the borrower paid the VA loan funding fee.

For those who paid their VA loan funding fee in cash, the fee should be refunded in the same way. However, any borrower who financed their VA loan funding fee will NOT get cash back. The money will be applied to the VA loan balance instead.

VA Loan rules state clearly, “A refund is appropriate if:

·  an exempt veteran paid a funding fee, or

·  a miscalculation of the fee caused an overpayment.

If the veteran was overcharged, the following applies:

·  A veteran who paid cash for the funding fee receives a cash refund for the amount of the overpayment. In the case of a veteran who paid the funding fee out of loan proceeds, the lender must apply the overpayment against the loan balance.”

That is basically the explanation of VA loan rules on funding fee refunds as listed in VA Pamphlet 26-7.

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