VA Disability and Your Mortgage:

If you receive VA disability compensation — at any rating, even 10% — three things change about buying a home in the Sacramento area, and together they are worth more money than almost any other benefit in the mortgage world. You are exempt from the VA funding fee, which on a typical local purchase saves five figures. Your disability compensation is non-taxable, which means it can generally be grossed up when a lender calculates your qualifying income. And if you are rated 100% or are compensated at the 100% rate due to individual unemployability, California knocks a substantial chunk off the assessed value of your primary residence every single year.

Most veterans know about one of the three. Very few have all three working at once.

Benefit One: The Funding Fee Disappears

The VA funding fee is the one-time charge that funds the loan program in place of monthly mortgage insurance. For 2026 it runs 2.15% of the loan amount for first-time use with less than 5% down, and 3.30% for subsequent use with less than 5% down. Larger down payments reduce it — 1.50% at 5% down, 1.25% at 10% or more — and an Interest Rate Reduction Refinance Loan carries just 0.50%.

Veterans receiving VA disability compensation pay none of it. Neither do certain Purple Heart recipients on active duty, or surviving spouses receiving Dependency and Indemnity Compensation.

On a $600,000 purchase in Elk Grove with nothing down, that is the difference between financing $600,000 and financing $612,900 — or $619,800 if it is your second time using the benefit. Over 30 years, the interest on that financed fee alone runs well into five figures.

2026 VA Funding Fee

First Use

Subsequent Use

Less than 5% down

2.15%

3.30%

5% to 9.99% down

1.50%

1.50%

10% or more down

1.25%

1.25%

IRRRL (streamline refinance)

0.50%

0.50%

Receiving VA disability compensation

$0

$0

If You Already Paid It and Later Got Rated

This is the one that costs veterans real money through sheer lack of awareness. If you closed a VA loan, paid the funding fee, and your disability rating was later granted with an effective date on or before your loan closing date, you may be entitled to a refund of the entire fee. Veterans who had a claim pending at closing and got a favorable decision months later are the classic case. It is worth checking — the refund is not automatic and nobody will call you about it.

Benefit Two: Grossing Up Non-Taxable Income

VA disability compensation is not taxed — not federally, not by California. Because underwriting compares your gross income to your monthly debts, income that arrives untaxed is worth more than the same dollar amount of taxable wages. Lenders account for this by grossing it up before running your debt-to-income ratio.

The practical effect: a veteran receiving $3,800 a month in disability compensation is not evaluated as a $3,800-a-month borrower. Once grossed up, that figure is treated as meaningfully higher — and that shift routinely moves a file from declined to approved, or raises a purchase price ceiling by tens of thousands of dollars.

The same treatment generally applies to other non-taxable income you may receive: certain Social Security benefits, Dependency and Indemnity Compensation, and some non-taxable pension income.

2026 VA funding fee percentages (2.15% / 3.30% / 1.50% / 1.25% / 0.50% IRRRL) reflect the current published schedule. Legislation has been introduced in 2026 that would change the IRRRL fee — confirm on VA.gov before posting.

California Disabled Veterans’ Exemption 2026 amounts: basic $180,671 assessed value, low-income tier $271,009 with a household income limit of $81,131. One secondary source lists lower figures; the $180,671 / $271,009 pair is corroborated by county assessor publications. Confirm with the Sacramento County Assessor or California BOE.

Do not state a specific gross-up percentage — treatment varies by loan program and investor overlay.

Rate anchor: 30-year fixed 6.66%, week of July 30, 2026 (Freddie Mac PMMS).

Benefit Three: California’s Disabled Veterans’ Property Tax Exemption

This one is state-level, it is separate from anything the VA does, and it repeats every year for as long as you own the home.

California reduces the assessed value of a qualifying veteran’s principal residence. For 2026 the basic exemption is $180,671 of assessed value. If total household income falls below the annual limit — $81,131 for 2026 — the low-income exemption rises to $271,009.

Eligibility requires a 100% service-connected disability rating, or compensation at the 100% rate due to individual unemployability. Unmarried surviving spouses of qualifying veterans may also claim it.

At a Sacramento-area effective property tax rate of roughly 1.1%, the basic exemption is worth in the neighborhood of $1,900 to $2,000 a year. The low-income tier lands closer to $2,900 to $3,000. On a 30-year hold, that is not a rounding error.

How to Actually Claim It

File form BOE-261-G, the Claim for Disabled Veterans’ Property Tax Exemption, with your county assessor — not with the VA, not with CalVet, and not with your lender. You will typically need your VA rating letter and proof the home is your primary residence. Counties in the region each run their own filing process, so start with the assessor for the county the home sits in: Sacramento, Placer, El Dorado, or Yolo.

One thing worth telling your loan officer during preapproval: the exemption reduces your annual property tax bill, which reduces the escrow portion of your monthly payment, which improves your debt-to-income ratio. If the lender does not know about it, they will underwrite you at the full tax figure and you will qualify for less house than you should.

Stacking All Three: What It Looks Like in Practice

Consider a veteran with a 100% rating buying a $625,000 home in Rocklin with no down payment, using the VA benefit for the first time.

Benefit

Effect

Approximate Value

Funding fee exemption

Fee waived instead of financed

$13,438 not added to the loan

Grossed-up disability income

Higher qualifying income

Raises purchase power / DTI headroom

CA Disabled Veterans’ Exemption (basic)

$180,671 off assessed value

~$1,900–$2,000 per year

Lower escrow from the exemption

Smaller monthly payment

Roughly $160–$170 per month

No monthly mortgage insurance

Standard VA benefit

Hundreds per month vs. comparable FHA

First-year impact clears $15,000 in most versions of this scenario, and the property tax savings keep compounding for as long as you own the home.

The Sacramento-Area Reality Check

With the 30-year fixed averaging 6.66% at the end of July 2026 and the 2026 conforming loan limit at $832,750 across Sacramento, Placer, El Dorado, and Yolo counties, VA financing reaches comfortably into most of the region — Elk Grove, Rocklin, Lincoln, Antelope, Rancho Cordova, and the more affordable pockets of Roseville and Folsom. VA loans have no maximum loan amount for veterans with full entitlement, but the entitlement math changes above the county limit, and jumbo-range VA purchases in El Dorado Hills or Granite Bay deserve their own conversation before you write an offer.

Frequently Asked Questions

Do I need a 100% rating to be exempt from the VA funding fee?

No. Any veteran receiving VA disability compensation is exempt, including at a 10% rating. The 100% requirement applies to California’s property tax exemption, which is a separate benefit.

Can I get the VA funding fee refunded if I was rated after closing?

Possibly. If your disability rating carries an effective date on or before your loan closing date, you may be entitled to a refund of the fee you paid. Refunds are not issued automatically, so you or your lender need to request the review.

How much is California’s disabled veterans property tax exemption in 2026?

The basic exemption reduces assessed value by $180,671. Veterans whose total household income is below $81,131 may qualify for the low-income exemption of $271,009. Both figures are adjusted annually.

Does VA disability income count when qualifying for a mortgage?

Yes, and because it is non-taxable it can generally be grossed up before the lender calculates your debt-to-income ratio. That treatment often increases how much home you qualify for compared to the same dollar amount of taxable income.

Where do I file for the California disabled veterans exemption?

With the county assessor where the property is located, using form BOE-261-G. In this region that means the Sacramento, Placer, El Dorado, or Yolo County Assessor — not the VA and not CalVet.

Can a surviving spouse use these benefits?

Surviving spouses receiving Dependency and Indemnity Compensation are exempt from the VA funding fee, and unmarried surviving spouses of qualifying veterans may claim the California property tax exemption. Eligibility rules differ between the two, so both are worth confirming individually.

Not sure which of these three you already have working?

A short conversation sorts out funding fee exemption status, how your disability compensation should be counted, and whether your property tax exemption is being reflected in your payment estimate. Veterans across Sacramento, Placer, El Dorado, and Yolo counties get a straight answer and no sales pressure.

Call or text (916) 794-0777  |  thechriskennedyteam.com

The Chris Kennedy Team | Reliant Lending | NMLS #971546. Equal Housing Lender. This article is for educational purposes only and is not a commitment to lend or an offer of credit. Rates, program guidelines, and loan limits change; terms are subject to credit approval, underwriting, and property eligibility.

If you receive VA disability compensation — at any rating, even 10% — three things change about buying a home in the Sacramento area, and together they are worth more money than almost any other benefit in the mortgage world. You are exempt from the VA funding fee, which on a typical local purchase saves five figures. Your disability compensation is non-taxable, which means it can generally be grossed up when a lender calculates your qualifying income. And if you are rated 100% or are compensated at the 100% rate due to individual unemployability, California knocks a substantial chunk off the assessed value of your primary residence every single year.

Most veterans know about one of the three. Very few have all three working at once.

Benefit One: The Funding Fee Disappears

The VA funding fee is the one-time charge that funds the loan program in place of monthly mortgage insurance. For 2026 it runs 2.15% of the loan amount for first-time use with less than 5% down, and 3.30% for subsequent use with less than 5% down. Larger down payments reduce it — 1.50% at 5% down, 1.25% at 10% or more — and an Interest Rate Reduction Refinance Loan carries just 0.50%.

Veterans receiving VA disability compensation pay none of it. Neither do certain Purple Heart recipients on active duty, or surviving spouses receiving Dependency and Indemnity Compensation.

On a $600,000 purchase in Elk Grove with nothing down, that is the difference between financing $600,000 and financing $612,900 — or $619,800 if it is your second time using the benefit. Over 30 years, the interest on that financed fee alone runs well into five figures.

2026 VA Funding Fee

First Use

Subsequent Use

Less than 5% down

2.15%

3.30%

5% to 9.99% down

1.50%

1.50%

10% or more down

1.25%

1.25%

IRRRL (streamline refinance)

0.50%

0.50%

Receiving VA disability compensation

$0

$0

If You Already Paid It and Later Got Rated

This is the one that costs veterans real money through sheer lack of awareness. If you closed a VA loan, paid the funding fee, and your disability rating was later granted with an effective date on or before your loan closing date, you may be entitled to a refund of the entire fee. Veterans who had a claim pending at closing and got a favorable decision months later are the classic case. It is worth checking — the refund is not automatic and nobody will call you about it.

Benefit Two: Grossing Up Non-Taxable Income

VA disability compensation is not taxed — not federally, not by California. Because underwriting compares your gross income to your monthly debts, income that arrives untaxed is worth more than the same dollar amount of taxable wages. Lenders account for this by grossing it up before running your debt-to-income ratio.

The practical effect: a veteran receiving $3,800 a month in disability compensation is not evaluated as a $3,800-a-month borrower. Once grossed up, that figure is treated as meaningfully higher — and that shift routinely moves a file from declined to approved, or raises a purchase price ceiling by tens of thousands of dollars.

The same treatment generally applies to other non-taxable income you may receive: certain Social Security benefits, Dependency and Indemnity Compensation, and some non-taxable pension income.

2026 VA funding fee percentages (2.15% / 3.30% / 1.50% / 1.25% / 0.50% IRRRL) reflect the current published schedule. Legislation has been introduced in 2026 that would change the IRRRL fee — confirm on VA.gov before posting.

California Disabled Veterans’ Exemption 2026 amounts: basic $180,671 assessed value, low-income tier $271,009 with a household income limit of $81,131. One secondary source lists lower figures; the $180,671 / $271,009 pair is corroborated by county assessor publications. Confirm with the Sacramento County Assessor or California BOE.

Do not state a specific gross-up percentage — treatment varies by loan program and investor overlay.

Rate anchor: 30-year fixed 6.66%, week of July 30, 2026 (Freddie Mac PMMS).

Benefit Three: California’s Disabled Veterans’ Property Tax Exemption

This one is state-level, it is separate from anything the VA does, and it repeats every year for as long as you own the home.

California reduces the assessed value of a qualifying veteran’s principal residence. For 2026 the basic exemption is $180,671 of assessed value. If total household income falls below the annual limit — $81,131 for 2026 — the low-income exemption rises to $271,009.

Eligibility requires a 100% service-connected disability rating, or compensation at the 100% rate due to individual unemployability. Unmarried surviving spouses of qualifying veterans may also claim it.

At a Sacramento-area effective property tax rate of roughly 1.1%, the basic exemption is worth in the neighborhood of $1,900 to $2,000 a year. The low-income tier lands closer to $2,900 to $3,000. On a 30-year hold, that is not a rounding error.

How to Actually Claim It

File form BOE-261-G, the Claim for Disabled Veterans’ Property Tax Exemption, with your county assessor — not with the VA, not with CalVet, and not with your lender. You will typically need your VA rating letter and proof the home is your primary residence. Counties in the region each run their own filing process, so start with the assessor for the county the home sits in: Sacramento, Placer, El Dorado, or Yolo.

One thing worth telling your loan officer during preapproval: the exemption reduces your annual property tax bill, which reduces the escrow portion of your monthly payment, which improves your debt-to-income ratio. If the lender does not know about it, they will underwrite you at the full tax figure and you will qualify for less house than you should.

Stacking All Three: What It Looks Like in Practice

Consider a veteran with a 100% rating buying a $625,000 home in Rocklin with no down payment, using the VA benefit for the first time.

Benefit

Effect

Approximate Value

Funding fee exemption

Fee waived instead of financed

$13,438 not added to the loan

Grossed-up disability income

Higher qualifying income

Raises purchase power / DTI headroom

CA Disabled Veterans’ Exemption (basic)

$180,671 off assessed value

~$1,900–$2,000 per year

Lower escrow from the exemption

Smaller monthly payment

Roughly $160–$170 per month

No monthly mortgage insurance

Standard VA benefit

Hundreds per month vs. comparable FHA

First-year impact clears $15,000 in most versions of this scenario, and the property tax savings keep compounding for as long as you own the home.

The Sacramento-Area Reality Check

With the 30-year fixed averaging 6.66% at the end of July 2026 and the 2026 conforming loan limit at $832,750 across Sacramento, Placer, El Dorado, and Yolo counties, VA financing reaches comfortably into most of the region — Elk Grove, Rocklin, Lincoln, Antelope, Rancho Cordova, and the more affordable pockets of Roseville and Folsom. VA loans have no maximum loan amount for veterans with full entitlement, but the entitlement math changes above the county limit, and jumbo-range VA purchases in El Dorado Hills or Granite Bay deserve their own conversation before you write an offer.

Frequently Asked Questions

Do I need a 100% rating to be exempt from the VA funding fee?

No. Any veteran receiving VA disability compensation is exempt, including at a 10% rating. The 100% requirement applies to California’s property tax exemption, which is a separate benefit.

Can I get the VA funding fee refunded if I was rated after closing?

Possibly. If your disability rating carries an effective date on or before your loan closing date, you may be entitled to a refund of the fee you paid. Refunds are not issued automatically, so you or your lender need to request the review.

How much is California’s disabled veterans property tax exemption in 2026?

The basic exemption reduces assessed value by $180,671. Veterans whose total household income is below $81,131 may qualify for the low-income exemption of $271,009. Both figures are adjusted annually.

Does VA disability income count when qualifying for a mortgage?

Yes, and because it is non-taxable it can generally be grossed up before the lender calculates your debt-to-income ratio. That treatment often increases how much home you qualify for compared to the same dollar amount of taxable income.

Where do I file for the California disabled veterans exemption?

With the county assessor where the property is located, using form BOE-261-G. In this region that means the Sacramento, Placer, El Dorado, or Yolo County Assessor — not the VA and not CalVet.

Can a surviving spouse use these benefits?

Surviving spouses receiving Dependency and Indemnity Compensation are exempt from the VA funding fee, and unmarried surviving spouses of qualifying veterans may claim the California property tax exemption. Eligibility rules differ between the two, so both are worth confirming individually.

Not sure which of these three you already have working?

A short conversation sorts out funding fee exemption status, how your disability compensation should be counted, and whether your property tax exemption is being reflected in your payment estimate. Veterans across Sacramento, Placer, El Dorado, and Yolo counties get a straight answer and no sales pressure.

Call or text (916) 794-0777  |  thechriskennedyteam.com

The Chris Kennedy Team | Reliant Lending | NMLS #971546. Equal Housing Lender. This article is for educational purposes only and is not a commitment to lend or an offer of credit. Rates, program guidelines, and loan limits change; terms are subject to credit approval, underwriting, and property eligibility.