One of the VA loan's biggest advantages is its limitation on closing costs — the VA restricts what fees lenders can charge veterans. But "limited fees" does not mean zero fees. Here is a complete, honest breakdown of what you will actually pay at closing on a VA loan. Use our VA calculators to model your total cash-to-close figure.
What It Means
The VA has a rule called the "4% rule" — non-allowable fees (fees the veteran cannot pay) cannot exceed 4% of the loan amount when charged by the seller or lender. Additionally, the VA prohibits certain fees entirely, such as attorney fees on the buyer's behalf and certain junk fees. This is one area where VA loans are significantly cheaper than conventional loans at closing. Compare this with our VA refinance closing costs guide.
Requirements
Fees Veterans CAN Pay:
- VA funding fee (1.25%–3.3% of loan — waived with disability rating)
- Origination fee (up to 1% of loan)
- Title insurance and title search
- Appraisal fee ($400–$900)
- Credit report fee (~$50)
- Recording fees
- Prepaid items: first year homeowners insurance, property tax escrow, prepaid interest
- Survey if required by lender
Fees Veterans CANNOT Pay (Non-Allowable):
- Escrow fees charged by the settlement agent
- Notary fees
- Attorney fees (buyer's attorney)
- Prepayment penalty fees
- Loan application or processing fees beyond the 1% origination
Examples
$350,000 VA purchase loan, first use, no disability:
- VA Funding Fee (2.15%): $7,525 — can be financed into loan
- Origination (1%): $3,500
- Appraisal: $600
- Title: $800
- Prepaids (insurance/taxes): $3,200
- Total out-of-pocket (excluding funded fee): ~$8,100
Tips
- Finance the VA funding fee into the loan to preserve your cash. This increases your loan balance slightly but requires no cash at closing.
- Negotiate seller concessions (up to 4% of the purchase price) to cover prepaids and other costs.
- Veterans with a disability rating of 10% or higher are exempt from the funding fee — confirm before closing.
- See what to bring to closing and our closing day guide for what happens on the big day.
Frequently Asked Questions
Q: Can I ask the seller to pay my closing costs?
A: Yes — VA allows seller concessions up to 4% of the loan amount. These can cover the funding fee, prepaids, and other allowable costs.
Q: Can I roll closing costs into my VA loan?
A: The VA funding fee can always be financed. Other closing costs generally cannot be rolled into a purchase loan (only in refinances).
Q: Are VA closing costs lower than FHA?
A: Generally yes. FHA has an upfront MIP (1.75%) plus ongoing MIP. VA's funding fee is similar but there is no ongoing mortgage insurance. Ask us to compare for your specific scenario.
