Is the VA funding fee tax deductible?

It has been treated as deductible mortgage insurance in some tax years, but that deduction has expired and been retroactively renewed multiple times, so the current answer depends on the tax year and on legislation. Ask a tax professional rather than a lender, including this one.

Can the VA funding fee be refunded?

Yes, in one situation. If you had a disability claim pending when you closed and the rating was later granted with an effective date before your closing date, you can apply for a refund. It is not automatic and you have to request it.

Does the VA funding fee count toward closing costs?

It is a closing cost in the sense that it is charged at closing, but it sits apart from lender fees and third-party charges. Most borrowers finance it rather than paying it, so it does not usually affect cash to close.

Do Guard and Reserve members pay a higher VA funding fee?

Not since January 1, 2020. The Blue Water Navy Vietnam Veterans Act eliminated the premium. Guard and Reserve members pay identical rates to active duty. Older charts and some calculators still show a difference.

Rate and Sean Goudreau have no affiliation with any government agency.

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The VA Certificate of Eligibility

The COE is the document that proves you can use the benefit. It also tells your lender how much entitlement you have and whether you owe the funding fee, which is why it is worth pulling before you start looking rather than after you are under contract.

Written by Sean Goudreau, Mortgage Loan Officer · NMLS #326155 · Rate

What is a VA Certificate of Eligibility?

A Certificate of Eligibility, or COE, is the VA's confirmation that your service qualifies you to use the VA home loan benefit. It states three things a lender needs: that you are eligible, how much entitlement you have available, and whether you are exempt from the funding fee. Most lenders can pull one electronically in minutes.

What does the COE actually do?

It answers one question and supplies two facts.

The question is whether your service history qualifies you. That is a VA determination and the COE is the record of it. Without one, a lender cannot close a VA loan, regardless of how obviously eligible you are.

The first fact is how much entitlement you have. If you have never used the benefit, or used it and had it restored, the COE reflects full entitlement. If you have an existing VA loan, it shows what remains, which determines what you can borrow with nothing down on the next property.

The second fact is your funding fee status. The COE states whether you are exempt, which is tied to your VA disability rating. This is the single most valuable line on the document and the one most often overlooked.

Worth being clear about what a COE does not do. It says nothing about whether a lender will approve you. Eligibility and approval are separate gates, and clearing one has no bearing on the other.

What lenders require

How do you get a Certificate of Eligibility?

Three routes, and they differ enormously in speed.

Through a lender

Fastest by a wide margin. Lenders have access to the VA's automated system and can usually return a COE in minutes during a phone call. There is no cost and no obligation attached to it.

This is what I would do, and not only because I am a lender. The automated system returns the document with the entitlement and exemption fields already populated, and someone who reads these regularly will catch a problem on it that you would not.

Online through VA.gov

You can request one yourself through your VA.gov account. It works, it is free, and for straightforward cases it is often immediate. Cases that need manual review take longer.

By mail with VA Form 26-1880

The slow route. Weeks rather than minutes. It exists for situations the automated system cannot resolve, and it is rarely the right first choice.

Surviving spouses are the exception. Those cases generally run through VA Form 26-1817 rather than 26-1880, they require documentation the automated system does not hold, and they take longer. If that is your situation, start early rather than assuming it will be quick.

Pulling a COE requires no credit check, no application and no commitment. It is a document request, not a step toward a loan.

What documents do you need to request one?

It depends on your status, and this is where files stall.

If you are a veteran, you generally need your DD-214, specifically a copy showing character of service. Member 4 is the copy lenders ask for.

If you are currently serving, you need a statement of service signed by your commander, adjutant or personnel officer. It has to include your name, Social Security number, date of birth, entry date, any lost time, and the name of the command providing it.

If you are National Guard or Reserve and never activated, you need proof of honorable service, typically an NGB Form 22 or 23 or the equivalent points statement.

If you are a surviving spouse receiving Dependency and Indemnity Compensation, the automated system can often handle it. If you are not receiving DIC, the request needs documentation of the service member's death and your marriage, and it goes through the longer route.

In practice, the automated system frequently returns a COE without any of this, because the VA already holds the service data. The documents matter when it does not.

What does a Certificate of Eligibility say?

It is a short document and most of it is administrative. Four things on it matter.

The entitlement code is a two-digit number identifying the service period that qualified you. It tells a lender which era your eligibility comes from. It does not affect how much you can borrow or what your loan costs.

The basic entitlement amount is usually shown as $36,000. This figure confuses almost everyone who reads it. It is a historical number that has not constrained borrowers with full entitlement since 2020, and it is not a limit on what you can borrow. If you have full entitlement, it does not apply to you.

The funding fee status line states whether you are exempt. This is the line to check first. It should say exempt if you have a VA disability rating of 10% or higher.

Any conditions or remarks appear at the bottom. This is where a prior loan shows up if you have one outstanding, and where the VA notes anything unusual about your case.

How entitlement works · The funding fee

What if your COE is wrong?

It happens, and it is fixable, but only if somebody notices.

The most common error is the exemption. If your disability rating was granted recently, the COE may not reflect it yet. The data feeds are not instant. A borrower who assumes the document is current pays a funding fee they do not owe, and nobody catches it because the paperwork looked authoritative.

The second most common is entitlement that should have been restored. You sold a house with a VA loan years ago, the loan was paid off, and restoration was never filed. The COE still shows entitlement committed to a property you do not own. This is a paperwork problem rather than an eligibility problem, and it usually surfaces at the worst possible moment.

Related and worse: an assumption. If someone assumed your VA loan and did not substitute their own entitlement, yours is still attached to that loan. The COE will show it, and there is nothing to fix, only to plan around.

Discharge characterization can also be wrong or incomplete, particularly for anyone with an other-than-honorable discharge or a discharge upgrade that has not propagated.

All of these are correctable. The COE can be updated, restoration can be filed, and a funding fee paid in error can sometimes be refunded. What none of them survive is nobody looking. Which is the argument for pulling the document early, when there is time to fix something, rather than three weeks before closing.

Frequently Asked Questions

How long does it take to get a Certificate of Eligibility?

Minutes through a lender or through VA.gov for straightforward cases. Weeks by mail, and longer for cases requiring manual review, including most surviving spouse applications.

Does a Certificate of Eligibility expire?

No. VA eligibility does not expire and neither does the certificate. It can become out of date if your circumstances change, such as a new disability rating or a prior loan being paid off, in which case it is worth pulling a current one.

Does it cost anything to get a Certificate of Eligibility?

No. It is free through every route, and any service charging for one is charging you for something you can get yourself in minutes.

Do you need a Certificate of Eligibility before making an offer?

No, but it helps. You need it before closing. Pulling it early costs nothing and settles both your entitlement and your funding fee exemption before either can complicate a transaction already under contract.

Can you get a Certificate of Eligibility with an other-than-honorable discharge?

Sometimes. Other-than-honorable is not an automatic disqualification. The VA reviews these individually through a character-of-service determination, and a discharge upgrade can change the answer. If you were told years ago that you did not qualify, it is worth checking again.

Learn more about the VA loan

Am I eligible?What service history qualifies you, and what lenders check separately

How entitlement worksWhat the COE is telling you about how much you can borrow

How VA loans workThe full picture, start to finish

The funding feeWhat the exemption line on your COE is worth

Check your Certificate of Eligibility

It takes a few minutes and it settles your eligibility, your entitlement and your funding fee exemption in one step. No credit pull, no application.

No credit pull or application. Sean will reach out personally.

Sean Goudreau

Mortgage Loan Officer

NMLS #326155

Rate

465 Waverley Oaks Rd Ste 200

Waltham, MA 02452

(781) 202-9056

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