Maximize Your VA Disability Benefits When Buying and Owning a Home

The VA home loan is already one of the strongest benefits available to veterans—zero down, no PMI, and better mortgage rates than conventional loans. But if you have a VA disability rating, whether 15% or 100%, there are extra benefits you receiving both when buying a home and throughout the years you own the home that can make home ownership a no-brainer.

These benefits aren’t minor add-ons - they're real, recurring savings of $10,000+ and money you can put toward other priorities, investments, or simply keeping your monthly expenses manageable.

Eliminate the Funding Fee With Your Disability Rating

When you take out a VA home loan, the Department of Veterans Affairs charges a one-time funding fee. This fee is meant to help maintain the VA loan program running, but it's expensive! For most first-time VA borrowers with no down payment, the funding fee is 2.15% of the loan amount. On an $800,000 home, that’s about $17,200. If you use a VA loan on your 2nd, 3rd or 10th home purchase with 0 down, the funding fee goes up to 3.3% and even if you want to refinance your existing VA loan with a streamlined refinance (IRRRL), you'd have to pay a VA funding fee of .5% each time.

Even worse, many veterans, who don't want to front the cash to pay for that hefty fee, typically roll the funding fee into their mortgage balance, which means you’ll pay interest on it for the entire life of the loan. That turns a $17,200 fee into nearly $50,000 in extra cost once interest is factored in.

The good news—the VA makes it possible to avoid this hefty fee for disabled veterans. In fact, if you have a VA disability rating of just 10% or higher, you don’t have to pay the funding fee at all. Right off the bat, your disability rating has saved you $17,200. This exemption eliminates one of the biggest upfront costs in the homebuying process and keeps your loan balance—and monthly payment—lower from day one.

Get Property Tax Exemptions From Disability Ratings

Property taxes are one of the biggest recurring expenses in homeownership—and in Texas, they’re some of the highest in the country. With no state income tax, cities, counties, school districts, and special districts rely heavily on property taxes to fund services. In Austin, Texas for example, if you owned a home in the 78744 or 78704 zip code, the combined property tax rate is roughly 1.8% of your home’s value—though this varies by location. In Williamson county, Texas, it can be almost 2.24%!

On an $800,000 home in Austin, Texas, you’re looking at around $14,400 annually. And because property values in many parts of Texas trend upward, those bills tend to grow over time.

Everyone can qualify for a homestead exemption in Texas, which reduces a portion of your taxable value, but that benefit pales in comparison to the savings available through a disabled veteran exemption.

This is exactly why disabled veteran exemptions matter. They reduce—or at higher ratings, erase—that recurring hit:

• In Texas, the exemption is tied to your VA disability rating.

  • A rating of 10–29% knocks $5,000 off your taxable value

  • 30–49% knocks $7,500, 50–69% knocks $10,000

  • 70–99% knocks $12,000, and

  • 100% wipes out property tax on your primary residence.

If you’re 100% in Austin on that $400,000 home, you’re not paying that $14,400+ yearly tax.

• Other states handle this differently:

  • Florida gives a full homestead exemption at 100%, with partial reductions starting at 10%.

  • California scales the Disabled Veterans’ Exemption by income and disability level, offering sizable assessed-value exclusions that reset annually.

  • New Hampshire grants a full property tax exemption to veterans with a 100% permanent and total disability rating.

  • Connecticut provides varying exemptions depending on disability level and local municipal policy, with higher ratings earning larger reductions.

  • Virginia offers a complete property tax exemption on a veteran’s primary residence for those rated 100% permanent and total—it does not offer partial exemptions for lower ratings.

Applying for the Exemption

These property tax breaks aren’t automatic—you have to apply. Each state has its own process, usually through your local appraisal or tax assessment office. For example, in Austin, you’d file with the Travis Central Appraisal District, either online or by mail, providing proof of identity and your VA disability rating letter.

Bottom line: if you own (or plan to own) in a high-tax market like Austin, these exemptions can swing your effective monthly payment by hundreds or even thousands. At 100%, it’s not a “discount”—it’s removing one of the biggest recurring costs of homeownership altogether.

Increased Buying Power With Your Disability Rating's Tax-Free Income

VA disability pay is tax-free. For loan qualification purposes, lenders can “gross up” that income by about 25%, improving your debt-to-income ratio and allowing you to qualify for a higher purchase price or secure better terms. As of 2025, a single veteran with no dependents earns about $171 per month at 10%, around $1,100 per month at 50%, and over $3,700 per month at 100% Permanent & Total. The actual amount depends on your exact rating and number of dependents, but even lower ratings provide meaningful, tax-free income that boosts buying power.

Common Questions About VA Disability and VA Loan Benefits

Q: Do I need a disability rating to qualify for a VA loan?
A: No. VA loans are available to eligible service members and veterans regardless of disability status. Your military service, not your disability rating, determines eligibility.

Q: Does a low disability rating limit my VA loan benefits?
A: No. Whether your rating is 10% or 100%, you can still qualify for the VA funding fee exemption and use your disability compensation as qualifying income.

Q: Can I get a VA loan if the VA has rated me incompetent?
A: Yes, but your fiduciary will need to assist in the process. The VA will review and approve the transaction to ensure it’s in your best interest.

Q: Are property tax exemptions automatically included with a VA loan?
A: No. Property tax exemptions are handled at the state and local level, not through the VA loan program. In Texas, the full exemption is only for 100% disabled veterans, and you must apply through your local appraisal district.

How to Appeal and Increase Your VA Disability Rating

If you’re not at 100%, you may be leaving serious money on the table. Here are your options to dispute a rating:

1. Supplemental Claim – Submit new and relevant evidence with VA Form 20-0995.

2. Higher-Level Review – Have a senior reviewer re-examine your case with VA Form 20-0996. No new evidence allowed.

3. Appeal to the Board of Veterans’ Appeals – File VA Form 10182 and choose Direct Review, Evidence Submission, or a hearing.

Appealing preserves your original claim date, meaning if you win, you could receive substantial back pay. Many veterans get results by working with a Veterans Service Organization (VSO) or attorney experienced in VA claims. You can also hire professionals who specialize in contesting or disputing disability ratings. While these services often involve a fee, as long as the fee is contingent on a successful outcome, retaining them can be a smart move to maximize your rating and benefits.

Final Thoughts on the Disability Rating and Homebuying

If you’re a veteran with a disability rating, you’re sitting on benefits that can dramatically lower the cost of buying and owning a home. From eliminating the funding fee to wiping out property taxes, these savings are worth tens of thousands to hundreds of thousands of dollars over time. Don't miss out on the benefits by renting instead of owning.  Whether you’re buying your first home or your fifth, make sure you’re leveraging every advantage you’ve earned through your service.