How Much a Disabled Veteran Saves on a VA Loan Without PMI

The Quick Read: The savings come from the VA funding fee, not from PMI. No VA loan carries PMI, for any borrower. A veteran who receives VA compensation for a service-connected disability is also exempt from the funding fee, the one-time charge most VA borrowers pay. The amount saved is the fee percentage that would have applied, multiplied by your loan amount. Everything else on the closing statement still applies.

PMI and the Funding Fee Are Different Things

Most of the confusion on this topic starts here. PMI is insurance a conventional lender requires when you put down less than 20%. It is charged monthly, and it protects the lender. A VA loan has no such insurance. The VA guarantee takes its place.

The funding fee is something else. It is a one-time payment made to VA, not to the lender and not to an insurer. VA uses it to offset the cost of a program with no required down payment and no monthly mortgage insurance. You can pay it in cash at closing or finance it into the loan.

So when someone says a disabled veteran “gets PMI waived,” the statement is half right. There is nothing to waive, because no VA borrower pays PMI. What the veteran does get waived is the funding fee. That is the real saving, and it is the one worth putting a number on.

What Is the VA Loan Envelope You Are Working In?

Before the savings math, here is the loan itself. Across the wholesale programs Lendmire places VA purchase files with, the structure looks like this:

• 100% financing, with no down payment as long as the price is not above the appraised value.
• No mortgage insurance of any kind.
• No VA loan limit with full entitlement. With remaining entitlement, a down payment may be required, so that case is one to talk through with a loan officer.
• A 580 decision-score floor on the wholesale programs Lendmire works with. VA itself sets no minimum credit score, and some lenders set a higher floor.
• Residual income as the controlling underwriting test.

These are guideline figures, subject to lender review of the full file. They are not a commitment to lend. Lendmire is a mortgage broker, so it arranges the loan through wholesale lenders and does not lend directly. You can read more on Lendmire’s VA loan programs page.

How the Funding Fee Works (and What You Skip)

The fee depends on three things: whether this is your first use of the benefit, how much you put down, and the loan type. On a purchase, the schedule across the programs we work with runs like this:

For other loan types, an IRRRL (the VA’s streamlined refinance of an existing VA loan) carries 0.5%. A cash-out refinance carries 2.15% on first use and 3.3% after. The exempt borrower pays none of these.

The fee applies to the loan amount, not the purchase price. VA’s own example makes the point: a first-time user who puts 5% down pays 1.5% of the loan, not of the home price. The down payment shrinks the loan, and a smaller loan means a smaller fee. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.

How Much Do You Actually Save?

The formula is simple. Take the fee percentage that would apply to you and multiply it by your loan amount. For an exempt veteran, the result is the amount you do not pay and do not borrow.

Here are three pictures, described in percentages so you can drop in your own price.

First-time user, no down payment. The fee that would have applied is 2.15% of a loan that equals the full price. That is the standard case for most VA buyers, and it is a real chunk of money.

Repeat user, no down payment. The fee jumps to 3.3%. A veteran who used the benefit before and is buying again with nothing down sees the largest gain. Subsequent use is where the exemption does the most work.

Buyer putting 10% down. The fee tier drops to 1.25% of a smaller loan. The saving is still real, but it is the smallest of the three. A bigger down payment already cut the fee, so the exemption has less to remove. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.

The exemption affects two places. At closing, it changes how the loan is structured.

The monthly effect depends on the loan amount and terms, so it varies from one loan to the next. What holds across the board is the direction. No PMI means no monthly insurance line. The exemption means no financed fee inflating the balance underneath it.

Who Qualifies for the Exemption?

The exemption is not limited to one rating level. VA’s wording is “receiving VA compensation for a service-connected disability,” and it names no minimum percentage. In practice, any compensable service-connected rating counts.

VA’s Buyer’s Guide lists these exempt groups:

• Veterans receiving VA compensation for a service-connected disability.
• Veterans entitled to that compensation who receive retirement or active-service pay instead.
• Unremarried surviving spouses of Veterans who died in service or from a service-connected disability.

VA’s funding fee page adds a Purple Heart category for service members who provide evidence by the closing date. Check that page for the current wording before you rely on it.

Notice what is not on the list. Retirement pay by itself does not trigger the exemption. It applies only when you would be entitled to compensation but take retirement pay instead. A veteran with a claim still pending is not exempt either, as the next section explains.

Where the General Rule Breaks

The headline is “disabled veterans skip the fee.” The edge cases are where files get tripped up.

Pending claims. If your exempt status cannot be verified before closing, the fee is collected as if you were not exempt. A VA circular on funding fee exemption tells lenders not to advise a veteran to close first and sort out the exemption later. A veteran later awarded compensation may be eligible for a refund. VA decides that, and it is not something to plan a purchase around. Check the current refund rules on va.gov.

Pre-discharge ratings. A service member close to separation can sometimes use a memorandum rating. The same circular says that if one is not obtained before closing, the service member is not eligible for the exemption. Get the paper in hand before the closing date.

Loan type. The exemption covers purchase, cash-out refinance and IRRRL. The dollar saving is smaller on an IRRRL, because its underlying fee is only 0.5%. If you are weighing a refinance later, Lendmire’s piece How Much a Veteran With a Disability Rating Keeps in a VA Cash-Out walks through that side.

Occupancy. VA loans are for homes you live in. The exemption is a primary-residence benefit, and this article does not extend it beyond that.

Reserve and Guard. Handbook language on separate fee rates for Reserve and National Guard borrowers does not matter to an exempt borrower, since the fee is zero.

How the Loan Is Underwritten, Step by Step

An exempt veteran still goes through full underwriting. Here is the sequence.

1. Certificate of Eligibility (COE). The COE decides eligibility. It also shows your funding fee status. The circular above says lenders should rely on the status shown there as evidence of exemption. If it does not, find out why before you write an offer.

2. Income. VA disability pay counts as income. VA’s credit underwriting chapter treats it as a benefit that does not have to be documented for the likelihood of continuance. Your COE may show the amount. In some cases it does not, and then an award letter fills the gap. Aid-and-attendance benefits and temporary ratings are worth raising with your loan officer early.

3. The gross-up. Disability pay is not taxed. VA’s Chapter 4 on credit underwriting allows lenders to use 125% of non-taxable income when they gross it up. That helps your debt-to-income ratio (DTI), which compares monthly debts to monthly income.

4. Residual income. This is the test that controls. Residual income is what is left of your monthly income after your debts, housing costs and certain living expenses. VA’s chapter calls DTI a guide that is secondary to residual income. In the wholesale programs Lendmire works with, the 41% DTI figure is a guideline and not a cap. A ratio above it needs residual income well above the table.

Here is the catch. The gross-up does not carry over to residual income. VA training material says to take the grossed-up income out of that calculation, so the actual figure is used. Disability income helps with DTI. It does not pad the residual income test.

5. Appraisal. The VA appraisal sets reasonable value and checks the minimum property requirements. Your disability status does not change it. The appraisal fee is a normal borrower cost.

6. Closing. The lender verifies exempt status, and VA’s Lenders Handbook Chapter 8 requires proof of the exemption (or of fee payment) with the closed-loan package. You see the result on your Loan Estimate and Closing Disclosure.

What Doesn’t Change

The exemption removes one line. It leaves the rest of the file alone.

• Closing costs. Appraisal, title, settlement and similar charges still apply. Only the funding fee disappears.
• Qualifying standards. Credit, income and residual income are reviewed the same way. An exemption is not an approval.
• Pricing. The exemption does not change what the loan costs in interest. Compare full terms on the Loan Estimate.
• Property rules. The home still has to meet VA’s minimum property requirements.

The Real Comparison: VA vs. Low-Down Alternatives

Put the exempt VA borrower next to someone using a low-down-payment alternative, and the gap is plain.

I am keeping dollars out of this table on purpose. Total cost over five or ten years depends on the price, the loan terms and how long you stay. The pattern is consistent, though. The VA loan with the exemption has the fewest ongoing insurance costs and no upfront fee. Neither alternative can say both.

Common Mistakes to Avoid

• Assuming the exemption is automatic. Check the COE before you make an offer.
• Closing on a pending claim and hoping for a refund. The fee is collected, and a refund is not something to count on.
• Mixing up the two tests. Disability income helps DTI, but residual income is the controlling test.
• Calling the funding fee “PMI.” They are different charges with different payees.
• Expecting all closing costs to vanish. Only the fee goes away.

Key Terms Defined

PMI (private mortgage insurance): Insurance on a conventional loan with a small down payment that protects the lender. VA loans do not have it.

VA funding fee: A one-time charge paid to VA on a VA-backed loan. Exempt borrowers do not pay it.

Certificate of Eligibility (COE): The VA document that confirms you qualify for the benefit and shows your funding fee status.

Residual income: The money left each month after debts, housing costs and set living expenses. It is the controlling test on a VA loan.

Gross-up: Raising non-taxable income to a pre-tax equivalent for DTI purposes. VA allows 125%.

IRRRL: The VA’s streamlined refinance for an existing VA loan. The fee is 0.5% unless you are exempt.

Practical Next Steps

Get your COE and confirm that it shows your exempt status. Gather your award letter in case the COE does not show your disability income. Decide how much, if anything, to put down, since a down payment changes the loan amount and the picture for non-exempt buyers. Then ask for a Loan Estimate and check that the funding fee line reads zero.

If you are buying a home and want to see whether a VA loan fits your file, Lendmire can help you compare the options and what each one asks of the file.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. VA.gov: VA funding fee and closing costs

2. VA Buyer’s Guide

3. VA circular on funding fee exemption

4. VA Lenders Handbook, Chapter 4: Credit Underwriting

5. VA Lenders Handbook, Chapter 8