VA Loan Closing Costs and Who Pays Them
Closing costs on a Department of Veterans Affairs (VA) loan are set by the lender and negotiated between buyer and seller. At Rank and Pay, we show how each figure is calculated. Among VA loan closing costs on a purchase, only the VA funding fee can be financed into the loan amount. Every other fee is paid when the loan closes. The VA also limits seller concessions to no more than 4 percent of the home's reasonable value. Three parties shape the final bill.
- The lender sets the interest rate, discount points and other closing costs, and these vary from lender to lender.
- The buyer and seller negotiate who pays each fee on the VA's negotiable list, from the real estate commission to the recording fee.
- The VA sets the 4 percent concession limit and the rule that only the funding fee can be financed on a purchase.
On a purchase, the funding fee remains the only fee that can move into the loan amount.
Lender-Set Fees and Negotiable VA Loan Closing Costs
Closing costs on a VA loan fall into two groups on VA.gov: prices that vary by lender and fees the buyer and seller negotiate. Discount points appear in both groups.
Costs Set by the Lender
The interest rate, discount points and other closing costs vary by lender, according to VA.gov. The VA does not publish a cap on the loan origination fee, a typical dollar total for closing costs, or a percent-of-price estimate.
Fees the Buyer and Seller Negotiate
VA.gov lists these closing costs as negotiable between buyer and seller:
- Real estate professional commission and fees
- Loan origination fee
- Loan discount points
- Credit report
- VA appraisal fee
- Hazard insurance and property taxes
- State and local taxes
- Title insurance
- Recording fee
Negotiable means the buyer and seller decide who pays each line. Discount points show the split: the lender sets what the points cost, and the buyer and seller decide which of them pays. Seller credits are not otherwise capped. The reasonable value appears on the VA Notice of Value.
VA Funding Fee Rates by Loan Type
The rates below took effect April 7, 2023, according to VA.gov. They depend on loan type, down payment and whether the loan is a first use or a later use of the benefit.
| Loan Type and Down Payment | First Use | After First Use |
|---|---|---|
| Purchase or construction, under 5 percent down | 2.15% | 3.3% |
| Purchase or construction, 5 percent or more down | 1.5% | 1.5% |
| Purchase or construction, 10 percent or more down | 1.25% | 1.25% |
| Cash-out refinance | 2.15% | 3.3% |
Three other loan types carry one listed rate each:
| Loan Type | Rate |
|---|---|
| Interest Rate Reduction Refinancing Loan (IRRRL) | 0.5% |
| Loan assumption | 0.5% |
| Manufactured home not permanently affixed | 1% |
On a purchase, the down payment changes the rate. With first use, 5 percent down drops the rate from 2.15 percent to 1.5 percent, a cut of 0.65 percentage points. After first use, the same 5 percent down drops it from 3.3 percent to 1.5 percent, a cut of 1.8 points. At 5 percent down or more, first use and later use pay the same rate. Funding fee exemptions and payment details are in the VA funding fee guide.
Fees Paid at Closing on a VA Purchase Loan
On a purchase or construction/permanent loan, every closing cost except the funding fee is paid when the loan closes. That includes the full negotiable list: commission, origination fee, discount points, credit report, appraisal fee, insurance, taxes, title insurance and recording fee. None of those can be added to the loan amount. Two VA rules bear on payments at closing. One is seller payments negotiated within the 4 percent concession limit. The other is financing the funding fee into the loan amount. Eligibility is a separate question from cost. The VA publishes its eligibility requirements on VA.gov, and the Certificate of Eligibility and VA loan entitlement pages explain those parts of the benefit.
Loan Estimate Review with the Lender
Four items are worth matching against the VA rules:
- The interest rate, discount points and other closing costs the lender sets.
- Each negotiable fee, and whether it falls to the buyer or the seller.
- The seller payments counted toward the 4 percent limit, measured against the reasonable value on the Notice of Value.
- The funding fee rate for the loan type, down payment and first or later use, and whether it is financed or paid at closing.
Program basics are in the VA home loan guide, and the VA loan vs. conventional loan comparison sets the two side by side. Before signing, match each of the VA loan closing costs on the Loan Estimate to a line on the VA's funding fee and closing costs page. This page is informational only and does not give legal or benefits advice, and Rank and Pay is not affiliated with the VA.