VA Loans for Disabled Veterans: Funding Fee Exemption and Adaptive Housing Grants

Name: Dan Ardis
Address: 3111 Camino Del Rio North Suite 905, San Diego, CA, 92108, US
Telephone: (661) 342-9381
Price range: $$
Rating: 5

Exempt

Funding Fee

10%+ service-connected disability

$5,000–$13,200

Savings (400k loan)

Depending on usage and down payment

Grossed Up

Disability Income

Non-taxable income can be increased 25%

Up to ~$104,000

SAH Grant

Specially Adapted Housing (2026)

Best Loan Programs for This Situation

VA LoansBest Fit

$0 down, no PMI, funding fee exempt for 10%+ disability rating. The most powerful mortgage product for eligible disabled veterans.

FHA LoansWith Conditions

If VA eligibility is unavailable (exhausted, denied), FHA is the next best option. No funding fee exemption but low down payment.

Conventional LoansWith Conditions

Works when VA isn't available. Higher income and credit requirements typically apply.

The VA loan is already the best mortgage program available for eligible veterans. For disabled veterans, it gets even better. A service-connected disability rating of 10% or higher exempts you from the VA funding fee, which can range from 1.25% to 3.30% of the loan amount. On a $400,000 home, that's $5,000 to $13,200 in cash you keep at closing. VA disability compensation also counts as qualifying income and can be grossed up, since it's non-taxable.

The Funding Fee Exemption

The VA funding fee is a one-time charge that replaces the mortgage insurance other loan programs require. For first-time VA use with no down payment, it's 2.15% of the loan amount. For subsequent use, it's 3.30%. Veterans with a service-connected disability rating of 10% or higher, and surviving spouses of veterans who died in service or from service-connected disabilities, are fully exempt. You don't pay the funding fee at all. This exemption is confirmed through your Certificate of Eligibility.

VA Disability Compensation as Qualifying Income

VA disability compensation is non-taxable income, and lenders can count it directly as qualifying income for your VA loan. Because it's non-taxable, conventional lenders can gross it up by 25% to reflect the pre-tax equivalent. This is a significant advantage: $2,000 per month in disability compensation becomes $2,500 in qualifying income on a conventional application. Combined with employment income or Social Security, disability compensation often provides more than enough monthly income to qualify.

Specially Adapted Housing (SAH) and SHA Grants

Veterans with service-connected disabilities that affect mobility may qualify for VA Specially Adapted Housing grants, which fund home modifications or help purchase an adapted home. The SAH grant provides up to approximately $104,000 (adjusted annually), and the SHA grant provides up to approximately $20,000 for modifications to an existing home. These grants are separate from the VA home loan and can be combined with VA financing. Dan can help you coordinate the grant application with your purchase timeline.

TDIU: Total Disability Individual Unemployability

Veterans who receive TDIU (paid at the 100% disability rate even if their rating is lower) are generally also exempt from the funding fee. TDIU income is counted like other VA disability compensation for mortgage qualification. Veterans receiving TDIU who are not currently employed can still qualify for a VA loan using their disability compensation as primary income.

Dan's Take

NMLS# 1412272

I come from a family of veterans and have helped many disabled veterans in Bakersfield use their VA benefits to buy homes. The funding fee exemption is automatic once your disability rating is confirmed on your COE, but you'd be surprised how many lenders fail to apply it. I verify this on every disabled veteran file I touch.

Are you a disabled veteran who wants to use your VA benefits to buy a home in Bakersfield with no funding fee?

Call Dan at (661) 342-9381. He'll review your income documentation and loan options in a free call.

Call Dan Apply Now

Frequently Asked Questions

How do I confirm my funding fee exemption status?

Your Certificate of Eligibility (COE) will indicate your funding fee exemption if you have a service-connected disability. Dan can pull your COE directly through VA's automated system and confirm your exempt status before you apply.

What if my disability rating is under review when I apply?

If your rating is pending, you may pay the funding fee at closing. If the disability rating is subsequently approved and backdated to before closing, you're entitled to a refund of the funding fee. Dan has helped veterans navigate this situation.

Can I combine my SAH grant with a VA loan?

Yes. VA loans and SAH grants are separate programs that can be used together. The grant reduces the amount you need to borrow. Timing and coordination matter, and Dan can help you structure the transaction.

Do I have to have a job to get a VA loan on disability income?

No. VA disability compensation is sufficient as standalone income if it's enough to support your target mortgage payment and DTI. Many disabled veterans who are not currently employed qualify on their compensation alone.

Is a surviving spouse eligible for the funding fee exemption?

Yes. Surviving spouses of veterans who died in service or from service-connected disabilities, who have their own VA loan eligibility, are exempt from the funding fee.