VA Loan Closing Costs: What You Pay and What the Seller Can Cover
Which fees you can finance, which you cannot, and how to lower the cash you bring to closing.
A VA loan can be a no-down-payment loan, but you still owe closing costs. Understanding which ones you can finance, which ones you must pay in cash and which ones the seller can cover is the difference between an easy closing and a surprise bill.
What you can finance and what you cannot
On a VA purchase loan, the VA says that only the funding fee can be financed into the loan amount. You must pay all other fees and charges when your loan closes. That is why a $0 down payment does not mean $0 at the closing table.
Use the VA funding fee calculator to see the fee for your loan, and whether financing it makes sense.
Costs the buyer and seller can negotiate
The VA lists these as costs the buyer and the seller can negotiate over who pays:
- Commission and fees for your real estate professional
- Loan origination fee
- Discount points
- Credit report
- VA appraisal fee
- Insurance and taxes
- Title insurance
- Recording fee
How seller credits work
The VA allows home sellers or builders to offer credits that cover some or all of the buyer's closing costs. There is no limit on credits for a loan's ordinary closing costs, but the VA does limit seller concessions to no more than 4% of the home's reasonable value.
Seller concessions include things like credits for the VA funding fee, paying off the buyer's debt, or prepaying the buyer's hazard insurance. Ask your real estate agent whether a seller credit is realistic in your market, since it is a negotiation, not a right.
Fees vary by lender
The VA does not set a single price for most of these charges, so amounts can vary from lender to lender and from place to place. Ask each lender for a Loan Estimate and compare the lines for origination fees, points and third-party services side by side.
Example: cash to close on a $300,000 home
Here is an illustration for a first-time VA buyer with no down payment who finances the funding fee. The individual amounts are assumptions that show the structure, not quotes. Your Loan Estimate will have the real figures. To run your own numbers, use the VA closing cost calculator.
| Item | Amount |
|---|---|
| Lender origination charge (assume 1%) | $3,000 |
| VA appraisal (varies by state) | $700 |
| Title insurance and settlement | $1,600 |
| Recording and government fees | $250 |
| Credit report | $50 |
| Prepaid interest, insurance and tax escrow | $2,600 |
| Closing costs and prepaids | $8,200 |
| VA funding fee (2.15%), financed into the loan | $6,450, added to the loan, not paid in cash |
| Seller credit negotiated in the offer (example) | -$6,000 |
| Cash the buyer brings | $2,200 |
Two things stand out. First, the funding fee is the largest single cost, but it does not need cash because it can be financed. Second, a modest seller credit can cut the cash needed by more than half. Ordinary closing costs like these do not count toward the 4% seller concession limit, which on a $300,000 home is $12,000.
The VA's limits on lender fees
VA rules also limit what a lender can charge a veteran. Instead of itemizing its own costs, a lender may charge a flat fee of up to 1% of the loan amount, and certain charges that are allowed on other loan types cannot be passed on to a VA borrower separately. If a Loan Estimate shows a long list of lender fees on top of a 1% origination charge, ask the lender to explain each one and which VA rule allows it.
Ways to lower your cash to close
- Compare Loan Estimates from at least three lenders.
- Negotiate seller credits in your offer.
- Finance the funding fee instead of paying it upfront. It raises your loan slightly but keeps cash in your pocket.
- Ask whether you are exempt from the funding fee. See our guide to the funding fee exemption.
Frequently asked questions
Can I roll all closing costs into a VA loan?
No. On a VA purchase loan, the VA says only the funding fee can be financed into the loan. You pay the other fees at closing unless the seller or another party covers them.
Can the seller pay my VA closing costs?
Yes. The VA allows sellers and builders to offer credits toward closing costs, but limits seller concessions to no more than 4% of the home's reasonable value.
What counts as a seller concession?
According to the VA, examples include credits for the VA funding fee, debt payoff and prepayment of the buyer's hazard insurance.
Are VA closing costs the same at every lender?
No. The VA says amounts may vary from lender to lender, so compare Loan Estimates.
Do I pay the VA funding fee at closing?
You can pay it at closing or finance it into the loan. Most borrowers finance it. Some borrowers are exempt.
Can you roll closing costs into a VA loan?
On a purchase loan, only the funding fee can be rolled into the loan. On a VA IRRRL (streamline refinance) the VA allows the closing costs, the funding fee and up to 2 discount points to be included in the new loan. For the other purchase costs the usual options are a seller credit, a lender credit in exchange for a slightly higher rate, or paying them in cash.
What are typical closing costs on a VA loan for the buyer?
Plan on roughly 2% to 5% of the purchase price, plus the funding fee if you pay it in cash instead of financing it. With the defaults in our VA closing cost calculator (a 1% origination fee, a $700 appraisal, title and recording fees, prepaid interest, and the insurance and tax escrows), a $350,000 purchase needs about $10,200 in cash to close with no seller credit, and about $3,900 with a $6,300 seller credit.
Who pays closing costs on a VA loan?
The buyer, unless the purchase contract says otherwise. The seller may pay any amount of the buyer's ordinary closing costs and up to 4% of the home's value in concessions, and the lender can cover costs in exchange for a higher rate. The VA also limits what a lender can charge: a flat fee of no more than 1% of the loan amount plus a list of specific allowable fees.
Sources
This page is educational and is not legal, tax or financial advice. Rules and rates can change, so confirm the details with the VA and your lender.