Many military members want to know which documents confirm a funding fee exemption on a VA loan. They are concerned that their exemption status may shape their VA loan file and what lenders check. This guide explains what lenders may look for so you can move forward with confidence.
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What documents are required to confirm a VA loan funding fee exemption?
SHORT ANSWER
The COE’s exempt status in the funding fee field is the primary document confirming a VA loan funding fee exemption. The VA Handbook confirms lenders may rely on that status without requesting a separate form in many cases. When the disability compensation amount on the COE differs from current benefits, the award disability letter resolves the discrepancy under VA rules.Smart Loan Savings Educational Content
| Target Element Name | Underwriting Impact on Your VA Loan Profile |
|---|---|
| AUS Refer Finding | A computer cannot issue an approval on your VA home loan file under VA rules when the funding fee has been waived on the file but the COE does not show an exempt status or the documentation supporting the exemption has not been confirmed. A person then underwrites your file by hand to read the funding fee field on the COE, confirm the exempt status, check whether the disability compensation amount is current, and document the exemption determination before the funding fee calculation can be finalized on the loan. For example, what borrowers often learn on the call is that the funding fee exemption is a financially significant item on a VA home loan file. On a $400,000 purchase, a first-use funding fee of 2.15% equals $8,600. Confirming the exemption early in the process means that amount stays in the veteran’s pocket rather than being financed into the loan on the VA mortgage file. |
| The COE Exempt Status — When No Separate Form Is Needed | Lenders may rely on the exempt status appearing in the funding fee field of the Certificate of Eligibility to confirm the funding fee exemption under VA rules. No VA Form 26-8937 is required when the COE shows an exempt status with the disability compensation amount in the conditions section. The VA Handbook confirms this explicitly. For example, what borrowers often learn on the call is that many veterans are surprised to learn the COE itself is the exemption document. They expect to provide a separate disability rating letter or VA compensation statement, but when the COE shows exempt and lists the monthly compensation amount, the lender already has all the documentation needed to waive the funding fee and confirm the disability income at the same time on the VA home loan file. |
| When the Award Disability Letter Is Required | Lenders obtain the award disability letter under VA rules when the disability compensation dollar amount shown on the COE differs from the current benefit the veteran is receiving. The letter confirms the current monthly benefit amount directly from the VA. For example, what borrowers often learn on the call is that a COE condition section showing a compensation amount set 2 or 3 years ago may not reflect a rating increase the veteran received since. The award disability letter from the VA benefits portal, or the veteran’s most recent bank statement showing the current deposit amount, resolves the discrepancy so the underwriter can confirm both the correct exemption status and the correct gross income figure used in the qualifying calculation on the VA home loan file. |
| When VA Form 26-8937 Is Required — The Contact RLC Situation | Lenders submit VA Form 26-8937, Verification of VA Benefits, under VA rules when the COE funding fee field shows “contact RLC” status. This means the system cannot make an automatic exemption determination, and the loan may need prior approval processing. This form is not required when the COE shows a clear exempt status. For example, what borrowers often learn on the call is that a “contact RLC” status often appears when the veteran’s disability rating is pending, when the rating was recently assigned and has not yet loaded into the VA system, or when the veteran has a fiduciary. In these situations, the Form 26-8937 submission to the Regional Loan Center is the step that triggers the VA’s formal exemption determination before the funding fee can be waived on the VA home loan file. |
| The Debt-to-Income Ratio | This is also called debt-to-income under VA rules. Lenders check if your monthly bills fit the standard debt rules used across VA programs. The funding fee exemption affects the DTI indirectly. When the funding fee is waived, the borrower does not need to finance it into the loan. This keeps the loan amount and the monthly principal and interest payment lower, which produces a lower DTI percentage in the qualifying calculation than a non-exempt borrower would see at the same purchase price on the VA home loan file. |
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| Approval Metric Checklist | Mortgage Requirements |
|---|---|
| Credit Score Baseline | VA mortgage programs may not share one standard minimum score, and individual lenders may use their own program rules. |
| Required Equity Cushion | VA home loan options may let you buy a home with no money down depending on full entitlement and lender program rules. |
| Emergency Cash Reserve | Lenders check your bank accounts to see if you have enough money to help cover home loan closing costs. |
| Your Personal Income | Lenders check your pay history, employment history, or tax paperwork to confirm your VA mortgage capacity. |
| Debt-to-Income Limits | Lenders check your total monthly bills plus the new mortgage to see if they fit within standard debt rules used across VA mortgage programs. |
| Property Value Checks | VA loans use a home appraisal to check if the property value fits the final mortgage loan amount. |
| Sources Used on This Page | VA Lender’s Handbook — benefits.va.gov | Consumer Financial Protection Bureau — consumerfinance.gov |
| VA loan guidelines are set by the U.S. Department of Veterans Affairs. Individual lender overlays may apply and vary by program. This page is provided for educational purposes only. Smart Loan Savings Educational Content | |
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| People Also Ask | Why These Questions Matter |
|---|---|
| What document confirms a VA loan funding fee exemption? | The COE exempt status in the funding fee field is the primary confirmation. The VA Handbook states lenders may rely on this status without requesting a separate form when the COE shows exempt with the disability compensation amount listed. |
| When do I need to provide my disability award letter for the VA funding fee exemption? | The award disability letter is needed when the compensation amount on the COE differs from the current benefit. It resolves the discrepancy so the lender can confirm both the exemption and the correct income figure on the VA home loan file. |
| What is VA Form 26-8937 and when is it required for a VA loan? | VA Form 26-8937 is required when the COE funding fee field shows “contact RLC” status. This means the system cannot make an automatic determination, and the loan may need prior approval processing under VA rules. |
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