- Your VA disability rating alone has no negative effect on VA loan eligibility.
- A disability rating can lead to significant savings on a VA loan, like a funding fee exemption, property tax reductions and qualifying disability income. Veterans with a 100% disability rating often qualify for the greatest savings.
- Disabled Veterans using VA loans may also be eligible for housing grants, like the SAH and SHA programs, that can fund home adaptations or construction to meet their unique needs.
A VA loan is one of the most powerful benefits Veterans earn through service. But if you’re a disabled Veteran, you might wonder how your disability rating or even past credit challenges affect your ability to qualify.
The good news: a VA disability rating often gives you more advantages, not fewer. While your credit history matters, it doesn’t automatically shut the door on your VA loan benefit. Let’s break it down step by step so you know what to expect.
Are Disabled Veterans Eligible for a VA Home Loan?
Yes, disabled Veterans who have VA loan entitlement are absolutely eligible for a VA loan.
Like all borrowers, you must meet VA service requirements to qualify. Your lender then reviews your credit score, debt-to-income ratio and residual income to ensure you can manage a mortgage payment.
Your disability rating itself won’t hurt your chances of qualifying. In fact, VA lenders can count disability income as effective income, and borrowers with a service-connected disability are exempt from paying the VA Funding Fee — a mandatory cost the Department of Veterans Affairs (VA) applies to every purchase and refinance loan to help cover losses and ensure the program's continued success.
VA disability income is even looked at favorably because it’s such a stable and consistent income source, as it's not likely to change. Since it’s also non-taxable, lenders can ‘gross up’ the income to increase the qualifying amount.
VA Loan Benefits for Disabled Veterans
No matter if you are a 10% or 100% disabled Veteran, the VA Funding Fee is waived, and disability income counts toward a VA loan.
VA Funding Fee Exemption for Disabled Veterans
Veterans receiving compensation for a service-connected disability are exempt from paying the VA Funding Fee, which otherwise applies to all purchase and refinance loans. This exemption also extends to surviving spouses of Veterans who died in service or as a result of a service-connected disability and who are otherwise eligible for a VA loan.
Not paying the funding fee is a big benefit for disabled Veterans and their spouses since it’s a percentage of the loan amount.
For many first-time homebuyers, the funding fee is 2.15%. For a $250,000 loan, that fee is $5,375. Borrowers without an exemption can ask the seller to pay this or pay it themselves, either upfront or over time by rolling the cost into the mortgage.
It’s also not uncommon for VA borrowers to wait on a disability rating determination during the loan process. In those cases, lenders must still obtain and remit the fee to the VA unless clear documentation shows the borrower is exempt. Veterans who receive a disability rating after their loan closes may be eligible for a refund of their VA Funding Fee.
This exemption isn’t just for a small group. According to VA’s most recent Fiscal Year (FY) 2024 Annual Benefits Report and its official Veteran Population Projection Model, about 6 million Veterans are receiving disability compensation at a rating of 10% or higher out of roughly 18 million Veterans nationwide — close to one in three Veterans who generally qualify for a VA Funding Fee waiver on VA purchase loans, cash-out refinances and IRRRLs.
In FY 2025, the VA guaranteed 528,343 loans, so a significant share of VA borrowers either already avoided the funding fee or may be able to seek a refund once their disability claim is finalized. For many, that can mean thousands of dollars in savings on a typical home purchase or refinance.
Does VA Disability Count as Income for a Home Loan?
Yes, VA disability compensation counts as stable, reliable income when qualifying for a VA loan. Disabled Veterans still need to meet the lender's credit and underwriting requirements to be eligible.
Generally, VA lenders look for a minimum credit score of 620 to move forward. A stable, reliable income that's likely to continue is critical, as is maintaining a healthy balance between debt and income.
Housing Grants for Disabled Veterans
Disabled Veterans may also qualify for VA housing grants that provide significant financial assistance for building or modifying a home to support independent living. The two primary programs are the Specially Adapted Housing (SAH) grant and the Special Home Adaptation (SHA) grant.
The SAH grant is designed for Veterans with more severe service-connected disabilities. Eligible Veterans can receive up to $121,812 to construct a specially adapted home, modify an existing home or apply the funds toward the unpaid mortgage balance on an adapted home.
The SHA grant offers up to $24,405 for Veterans whose service-connected disabilities require targeted home adaptations.
Every borrower's situation is different, so it's best to contact the VA directly to determine whether you're eligible to utilize the SAH or SHA program.
VA Property Tax Exemptions
Disabled Veterans may qualify for property tax exemptions that can reduce or eliminate one of the highest ongoing costs of homeownership. These exemptions vary by state and other factors, but are typically tied to a Veteran's disability rating.
At Veterans United, borrowers may qualify for a loan with tax-exempt amounts and have escrows set up to reflect the exemption. Talk with a Veterans United VA loan expert at 855-870-8845 for more details.
What if the Veteran was Rated Incompetent?
In some cases, the VA may determine that Veterans are unable to manage their own hard-earned VA benefits because of health-related issues.
When this happens, the VA will appoint a fiduciary, meaning a third party authorized to manage the Veteran's financial affairs, to receive the disability compensation and help the Veteran best utilize it.
Veterans in these situations may qualify for a VA loan, but these files require formal approval from the VA in order to close.
VA officials want to ensure the new loan is in the best interests of the Veteran. Review times can vary, but they may take up to a month or more in some cases.
Getting a VA Loan With a 100% Disability Rating
Veterans with a 100% disability rating often qualify for the most significant savings in the VA home loan program. This is especially true for Veterans with a Permanent and Total (P&T) rating, meaning the VA considers the disability both service-connected and unlikely to improve.
While all disabled Veterans with compensation are exempt from the VA Funding Fee, those rated 100% often qualify for additional housing-related perks not always available at lower ratings.
Special Home Loan Benefits for 100% Disabled Veterans
In addition to the funding fee exemption, Veterans with a 100% disability rating may qualify for:
- Full property tax exemptions. Many states waive property taxes entirely for Veterans with a 100% rating, which can eliminate a big ongoing cost of homeownership. Benefits vary by state, so check with your local VA office or county assessor's office.
- SAH and SHA housing grants. Veterans with severe, permanent service-connected disabilities may qualify for up to $121,812 through the Specially Adapted Housing (SAH) grant or up to $24,405 through the Special Housing Adaptation (SHA) grant to build or modify a home that fits their needs.
Combined with the standard VA loan benefits of no down payment and no private mortgage insurance, a VA home loan can be one of the most affordable paths to homeownership for 100% disabled Veterans.
For example, say you buy a $250,000 home with a VA loan. Normally, a first-time buyer would pay a VA Funding Fee of $5,375. With a 100% disability rating, the fee is waived, resulting in immediate savings of more than $5,000.
As mentioned above, a Veteran with a 100% disability rating won’t pay any property taxes in most states. If property taxes in your area run around $2,500 a year, that’s another $25,000 saved over 10 years of homeownership.
Overall, that's more than $30,000 in potential savings, before factoring in any SAH or SHA grant assistance you may also qualify for. That money can instead go toward family needs, savings or home improvements.
Home Loans for Disabled Veterans With Bad Credit
Getting a VA loan while disabled and with bad credit is possible, but it depends on your definition of bad credit.
The VA doesn’t set a minimum credit score requirement, but lenders generally want a 620 mortgage credit score or higher to secure financing for a VA loan.
However, if your credit score is below a lender's minimum, that doesn’t immediately count you out. Some lenders consider compensating factors to help offset your bad credit.
Veterans United offers complimentary credit consulting services to help individuals qualify for a VA loan. Thousands of Veterans have improved their credit profile and secured loan approval with our help.
VA Loans and Disabled Veterans: The Big Picture
Your VA disability rating is not a barrier to homeownership; it’s often an advantage. From VA Funding Fee savings to property tax exemptions and VA disability income qualification, disabled Veterans can access powerful benefits.
Even with bad credit, it’s worth exploring your options with a VA-approved lender. Reach out to a Veterans United VA loan expert at 855-870-8845 or get started online today.
How We Maintain Content Accuracy
Our mortgage experts continuously track industry trends, regulatory changes, and market conditions to keep our information accurate and relevant. We update our articles whenever new insights or updates become available to help you make informed homebuying and selling decisions.
Current Version
Jun 4, 2026
Written ByChris Birk
Reviewed ByTara Dometrorch
Minor content updates outlining additional resources and housing grant opportunities for disabled Veterans.
Dec 10, 2025
Written ByChris Birk
Reviewed ByTara Dometrorch
Minor update to include data figures estimating how many Veterans benefit from funding fee exemptions.
Nov 4, 2025
Written ByChris Birk
Reviewed ByTara Dometrorch
Minor content updates for clarity. Article reviewed and fact checked by team lead underwriter Tara Dometrorch.
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