Three Charges, Three Authorities, All at Zero

Program and regulatory figures verified October 10, 2026. Details change; confirm your scenario with us.

By Mike Certo, Cornerstone First Mortgage · NMLS #260555 · Updated October 10, 2026

The interesting thing about Pennsylvania is not any one of these waivers. It is that one veteran can hold all three, and no agency involved will tell them so.

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The stack

#	Charge	Authority	What triggers the zero
1	Down payment	U.S. Dept of Veterans Affairs	Full entitlement. The VA: "You don't have a loan limit (as long as you can afford the loan amount and the property appraisal supports the purchase price of the home)"
2	VA funding fee	U.S. Dept of Veterans Affairs	Receiving VA compensation for a service-connected disability, one of five exempt categories
3	★★ Real estate tax	the Commonwealth	100% permanent service-connected or TDIU, plus wartime service, residency, occupancy, ownership and financial need

★★★ Three separate bodies applying three separate tests. The VA does not check your Pennsylvania tax status. The Commonwealth does not check your entitlement. Your county Director of Veterans Affairs does not know what loan you are applying for.

★ Which is why veterans miss pieces of this. The commonest version we see is a veteran who knows about zero-down, knows the funding fee was waived, and has never heard of the state exemption.

★★ The overlap is tighter than it looks

Zeros 2 and 3 are triggered by closely related facts. The funding-fee exemption turns on receiving VA compensation for a service-connected disability. The tax exemption turns on a 100% permanent rating or TDIU.

★★ So a veteran who qualifies for the tax exemption's rating test is, in practice, almost certainly already exempt from the funding fee. The reverse is not true: plenty of veterans with a compensable rating below 100% are fee-exempt and nowhere near the tax exemption.

★ And the wartime condition sits only on the Pennsylvania side. The VA's fee exemption does not care when you served. Which is where people get caught.

★★ What you still pay, and it is not nothing

★★ Transfer tax. The Commonwealth charges 1%; Philadelphia charges 4.578% in total. The VA loan does not cover it and the exemption does not touch it. On Philadelphia's typical $389,523 that is about $17,834. The detail
Homeowner's insurance. Required, and unaffected by any of the three.
The appraisal and other closing costs.
★ The lender's approval. The VA is explicit: "Even if you have full entitlement…your lender will still need to approve you for a loan."

★★ So "nothing down" is not "nothing at closing". A veteran buying in Philadelphia needs cash for transfer tax even with all three zeros in hand. In Pittsburgh at $232,121, or Johnstown at $112,455, that number is far smaller. The geography of that.

★★ What the stack does to the mortgage file

Two things, and the second is the one lenders underuse.

One: the monthly payment. Property tax is normally escrowed into the monthly housing payment. An approved exemption takes it out, which lowers the payment we underwrite.

★★ Two: residual income. The VA requires a residual-income test alongside debt-to-income, computed after shelter expenses. Property tax is part of that shelter figure. Remove it and residual income improves directly, which can matter more than the ratio does.

★ We publish no residual-income thresholds. The current authority is VA Pamphlet 26-7, Chapter 4 in the VA's KnowVA portal; we decline as policy to reproduce underwriting tables that change, and run your actual numbers instead. How the test works.

★ The order to do this in

Confirm your entitlement with the VA, and get the COE.
Confirm your funding-fee exemption status, a proposed or memorandum rating before closing counts.
★ Start the county exemption application early, with your county Director of Veterans Affairs. It is a separate process on a separate timeline.
Then talk to us about the loan, and tell us where the exemption application stands.

★ We are not affiliated with the VA and we do not administer the Pennsylvania exemption. Mike Certo, NMLS #260555. (480) 296-6513 · mcerto@cfmtg.com.

Frequently asked questions

Can a Pennsylvania veteran avoid the down payment, funding fee and property tax?

Yes, if the right conditions line up. Full VA entitlement removes the down payment, receiving VA compensation for a service-connected disability removes the funding fee, and the Pennsylvania Disabled Veterans' Real Estate Tax Exemption removes real estate tax on a principal dwelling for a veteran with a 100 percent permanent rating or TDIU plus wartime service and financial need.

What does a VA loan not cover in Pennsylvania?

Transfer tax, homeowner's insurance, the appraisal and other closing costs. The Commonwealth charges 1 percent transfer tax and Philadelphia charges 4.578 percent in total, which is about $17,834 on Philadelphia's typical home value of $389,523. Neither the VA loan nor the property-tax exemption covers it.

How does the Pennsylvania property tax exemption affect a mortgage application?

In two ways. It lowers the monthly housing payment because property tax is normally escrowed, and it improves the VA's residual income calculation because property tax forms part of the shelter expense subtracted in that test.

Does the VA funding fee exemption require wartime service?

No. The funding-fee exemption turns on receiving or being eligible to receive VA compensation for a service-connected disability, and does not depend on when you served. The wartime-service condition applies only to the Pennsylvania property-tax exemption.

Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about VA home loan financing, not a loan commitment and not legal, tax or financial advice. Cornerstone First Mortgage is a private lender and is not affiliated with, endorsed by or acting on behalf of the U.S. Department of Veterans Affairs or any government agency. VA entitlement, funding-fee exemption and disability ratings are determined by the U.S. Department of Veterans Affairs. The Pennsylvania Disabled Veterans' Real Estate Tax Exemption is administered by the Pennsylvania State Veterans' Commission through each county Director of Veterans Affairs, not by Cornerstone; its criteria and income thresholds are set by the Commonwealth and change. Figures here carry the date we verified them against primary sources. All loans are subject to borrower, property and program qualification.