Like other mortgage options, borrowers can expect VA loan closing costs of some kind. The good news is that the VA has protections for Veterans and service members that put a cap on certain fees for VA loans.
The total costs to VA borrowers can vary, and not all costs need to be paid at closing. Let's take a closer look at some of the costs and fees associated with getting a VA home loan.
You can expect your VA loan closing costs to be between 3% - 5% of the total VA loan amount. The exact amount you'll pay will vary based on your location, lender fees and other specifics outlined in your closing documents.
Not all VA closing costs are transaction fees or even related to the VA home loan itself. What you ultimately owe at closing and your overall costs can be broken down into two categories: loan costs and other non-loan costs.
Let's dig into the key differences in each category.
Loan-related costs are tied directly to your home financing and can vary quite a bit from lender to lender. Working with reputable VA lenders who are willing to break down your costs before closing can help. While your final VA loan costs may vary, here's a list of typical VA loan costs you may encounter:
Aside from any financing-related fees, there are other costs you may see on your closing documentation. Your lender, real estate agent and title company will work together to calculate these final costs just before your closing date. Still, an estimate may be available earlier in the process. Non-loan closing costs may include the following:
VA loan closing costs are paid by the homebuyer, seller and mortgage lender. Many costs can be negotiated between each party. For example, the VA allows sellers to pay all of your loan-related costs and up to 4% of the purchase price in additional concessions.
The VA restricts both the amount and types of fees buyers can pay when using a VA loan to protect homebuyers. As a homebuyer, you can typically expect to pay a portion or all of the following costs:
However, there are closing costs that the VA will not allow buyers to pay under any circumstances. See the complete list of VA non-allowable fees and closing costs.
VA loan lenders are not allowed to charge homebuyers more than 1% of the total loan amount to cover their services. For example, if you're getting a $200,000 VA home loan, you cannot pay more than $2,000 in origination and processing costs.
Lenders may charge a flat 1% fee or itemize their costs, but the VA 1% rule stands either way.
The Department of Veterans Affairs allows sellers to pay up to 4% of the buyer's VA closing costs in the form of concessions. Sellers can also contribute to loan-related costs like discount points because these are not considered a concession.
If the seller has any concerns with an increase in their costs, talk to your lender. In some cases, you may be able to increase your overall purchase price on the property up to the appraised value. The seller could then put that additional cash towards your closing costs.
While VA loan closing costs are comparable to — and often less than — other mortgages, there are a few key differences:
No. VA loans never include PMI, even if you put $0 down at closing; it’s one of the many benefits of the VA loan program.
You may be required to pay the VA funding fee to help fund the VA loan program. Many Veterans and service members are exempt from paying the VA funding fee, and others often roll these costs into their mortgage.
The VA funding fee is the only closing cost that can be rolled into your VA home loan. To limit the cash needed to close, some borrowers will offer more for their home and ask the seller to use these additional funds to cover other closing costs.
Experienced VA loan lenders can help estimate your closing costs for you and work with you to achieve your homebuying goals, including limiting the cash needed to close. Compare the Nation's top VA loan lenders here.
