Disabled Veterans have sacrificed more for our country than most of us ever will, and it’s only fitting that they receive special considerations when applying for a VA loan. Although they still need to qualify with credit and income to get a VA home loan, disabled Veterans who’ve received their injuries while in service often don’t need to meet the minimum required service days for war or peacetime on active duty. Along with the traditional benefits Veterans and active-duty members are entitled to with a VA home loan — from zero-percent down payments to no private mortgage insurance (PMI) — disabled Veterans also may qualify for exclusive advantages. Let’s go through some of these additional benefits.
VA waives funding fee for disabled Veterans
The VA funding fee, an administrative fee tagged onto most VA mortgages, supports the VA loan guaranty program, keeping these loans low-cost and available to future military personnel. Even with the funding fee, VA loans are traditionally the most affordable loan types used to purchase or refinance a home. However, some Veterans are exempt from paying the funding fee, saving them several thousand dollars. For example, in 2021, a first-time VA loan homebuyer putting no down payment would pay a 2.3 percent funding fee. That’s $2,300 for every $100,000 borrowed.
Exempted personnel are as follows:
- Disabled Veterans receiving compensation from the VA for a service-connected disability
- Veterans entitled to receive VA compensation for service-related disabilities but who received retirement pay or active-duty pay
- Active-duty servicemembers who, on or before the date of closing, provide evidence of having been awarded the Purple Heart
Typically, the exemption status is confirmed on each Veteran’s Certificate of Eligibility (COE) that lenders request from the Department of Veterans Affairs to prove a Veteran is eligible for a VA loan.
Note that Veterans currently receiving disability benefits but who haven’t closed on their VA loans will have the funding fee waived. In addition, Veterans who closed on their loans before receiving disability benefits may get the fee refunded. Veterans need to be aware that the effective dates of their VA compensations must be retroactive to before the date of their loan closings. If the application for disability is dated after closing, the VA may not issue a refund.
To find out if you’re due a funding fee refund, you can check with your lender or servicer or contact your state’s VA Regional Loan Center.
Veterans can receive Specially Adapted Housing (SAH) grants
Okay, so we know that disabled Veterans and active-duty servicemembers can purchase a home without paying a funding fee, and that’s good news. Chances are, however, that house is not equipped to meet the needs of disabled people looking for independent living. Once again, though, the VA has provisions in place to mitigate any obstacles that would prevent disabled homeowners from enjoying their living space.
The Department of Veterans Affairs offers the Specially Adapted Housing (SAH) program that awards grants to Veterans and active-duty servicemembers who have specific service-connected disabilities. These grants assist Veterans with purchasing, remodeling, or building an adapted home. For instance, a Veteran might modify a home to have a wheelchair-accessible curbless shower or walk-in tub, ramps instead of stairs, or any other changes that allow for easier access.
Use an SAH grant for one of the following:
- Build a specially adapted home on land you already own or land you are buying
- Remodel an existing home, if adaptable, to meet your needs
- Apply the grant to the mortgage balance of an adapted home not bought using VA grant funds
Are you eligible for a Specially Adapted Housing grant?
To get an SAH grant, you’ll have to use the proceeds to build, buy or modify a home in which you plan to live for a long while. Not only are you required to own the house, but you must have a qualifying service-connected disability and be entitled to compensation due to disabilities that may include any of the following:
- Loss or loss of use of more than one limb
- Loss or loss of use of a lower leg along with the residuals (lasting effects) of an organic (natural) disease or injury
- Loss or loss of use of one leg together with the loss or loss of use of one arm
- Blindness in both eyes (with 20/200 visual acuity or less)
- Certain severe burns
- Loss, or loss of use, of one lower extremity (foot or leg) after September 11, 2001, which hinders balancing or walking without the help of braces, crutches, canes, or a wheelchair. Note that the VA is authorized to approve up to 120 grants per fiscal year for this specific disability, increasing from only 30 grants in previous years thanks to the Ryan Kules and Paul Benne Specially Adaptive Housing Improvement Act of 2019 effective in August 2020.
The U.S. government fiscal year begins on October 1 and ends on September 30. So, if you qualify for but don’t receive a grant during the current fiscal year because the limit has been reached, you may be eligible to use the benefit in the future.
The SAH grant is pretty generous, and it gets adjusted annually. For instance, during this 2021 fiscal year, those qualifying for the grant can get up to $100,896, the total maximum amount allowed.
Don’t confuse SAH with SHA
Now it might look as if we’re talking with about as much clarity as alphabet soup, but these two grants offered by the VA to Veterans and servicemembers with service-connected disabilities are easily distinguished from one another. The SHA grant amount is much smaller, and some of the eligible disabilities differ. SHA stands for Special Housing Adaptation, and while the SAH grant provides more than $100,000, the SHA maxes out at $20,215 for the 2021 fiscal year.
The SHA grant is available to Veterans who have the following disabilities:
- Blindness in both eyes with 20/200 visual acuity or less
- Loss of or loss of use of both hands
- Certain severe burn injuries
- Certain severe respiratory injuries
Use an SHA grant for one of the following:
- Adapt the home you currently live in that you or a family member already own
- Adapt a home for you to live in that you or a family member are buying
- Help you buy a home to live in that’s already adapted
To apply for an SAH or SHA grant, fill out VA-Form 26-4555 and submit it to your nearest VA Regional Loan Center.
Disability payments count as income when applying for a VA loan
As a disabled Veteran applying for a VA loan, you still must meet the lender’s income requirements. For VA loan eligibility, you’ll not only have to show a decent credit score – 640 – but a balanced debt-to-income ratio as well. You also need to prove that your income is stable, reliable, and continuous. And, chances are, your disability pension payments will continue regularly.
Property tax exemptions for disabled Veterans
Depending on your location and the value of your house, property taxes can add a hefty chunk of change to your monthly mortgage payments. However, as a Veteran with a service-connected disability, you might meet the eligibility requirements for property tax exemptions. These vary by state, and not all states offer the same tax breaks, and the qualifying criteria for the tax breaks can differ. Also, note that some states may require that you register one time for specific tax benefits while others need you to do so each year.
Keep in mind that tax laws can often change with little fanfare, so be sure to discuss your state’s current tax exemptions with a professional to ensure that the previous year’s exemptions still apply in the current tax year.
Knowledge is power, and that power can save you thousands of dollars while making your life as a disabled Veteran barrier-free and far more independent than you imagined. At Aligned Mortgage, our team of loan experts, many of whom are Veterans, can answer any questions you have regarding your VA home loan.