Mortgage Loan Originator (MLO) Licensing Practice Test

When can a veteran be exempt from the VA funding fee?

1. After their first loan use

2. If they are receiving disability benefits

3. When refinancing

4. Only when buying a new home

The correct answer is: If they are receiving disability benefits

A veteran can be exempt from the VA funding fee specifically if they are receiving disability benefits. This is designed to provide financial relief to veterans who have service-related disabilities. The funding fee is generally assessed on borrowers using the VA loan program to help offset the costs of the program. However, to alleviate some of the financial burdens on veterans with disabilities, exemptions are offered. This exemption encourages veterans to take advantage of VA loans without incurring additional costs due to the funding fee, which can be significant. Other scenarios mentioned, such as after a first loan use, when refinancing, or only when buying a new home, do not apply as broadly or do not necessarily provide exemptions from the funding fee. Only veterans who are receiving service-connected disability compensation are allowed to bypass this fee entirely, underscoring the VA's commitment to assisting those who have served and sustained disabilities in the line of duty.