VA Loan Closing Costs: What to Expect

Learn How Much You Might Pay for Closing Costs on a VA Loan

VA loans help veterans buy and refinance their homes with competitive interest rates, flexible credit terms, and no down payments. But “zero down payment” doesn’t mean "zero cost."

Like other mortgages, VA loans require closing costs you’ll need to pay at closing or roll into your home loan. Read on to learn more about what you can expect for closing costs with a VA loan.

What Are VA Loan Closing Costs?

VA closing costs are fees you pay to finalize the purchase of your home. These fees are designed to allow your lender to originate your loan and help fund the VA loan program (giving more veterans and their families the opportunity to become homeowners). Disabled veterans and some surviving spouses may be exempt from the VA funding fee, one of the largest VA loan closing costs, which we’ll cover in more detail.

The closing costs of VA loans average between 2% and 6% of the total loan amount. You’ll be responsible for paying some of the closing costs, but the seller can also pay a portion of them via seller concessions, which are contributions the seller agrees to make toward your closing costs.

Keep in mind: The VA prohibits borrowers from paying some closing costs. These non-allowable fees include attorney fees, commissions, certain inspection fees, and prepayment penalties.

Who Pays Closing Costs on a VA Loan?

Buyers and sellers can negotiate who’ll pay VA loan closing costs, but VA loans have unique rules about who can pay which closing fees.

• Buyer responsibilities: You’ll usually pay the VA funding fee, as well as origination, appraisal, and credit report fees. The VA allows buyers to also pay for a termite inspection in the event that one is required by the Notice of Value (NOV) provided by your lender.
• Allowable seller contributions: The VA allows home sellers to cover some (or all) of your closing costs, but limits seller concessions to no more than 4% of your home’s reasonable value, as listed in the NOV.
• Lender-related fees: Lenders must pay any non-allowable fees, such as extra attorney, processing, or document preparation fees. These can’t be charged to the borrower and must be absorbed by the lender or covered through seller or lender credits.

Breakdown of VA Home Loan Closing Costs

VA closing costs typically include government fees as well as lender and third-party fees:

VA Funding Fee

Most veterans and service members will have to pay a one-time VA funding fee when they get a VA loan. The VA funding fee currently ranges between 0.5% and 3.3% of the mortgage amount, depending on whether you’re buying or refinancing. You can pay the fee at closing or include it in your loan.

You may be exempt from having to pay the VA funding fee if:

• You receive or are eligible for compensation from the VA for having a service-connected disability
• You’re a surviving spouse of a veteran and receive Dependency and Indemnity Compensation (DIC)
• You’re an active-duty service member who received a Purple Heart

There are other situations where you may be exempt from paying the VA funding fee, which are detailed on the VA’s website .

Other VA Mortgage Closing Costs

Additional standard VA loan closing costs include:

• Loan origination fee: This fee covers processing, evaluating, and approving your loan application. Loan origination fees can vary from lender to lender, but the VA caps them at 1% of the loan amount. For VA IRRRLs, this 1% cap applies to the loan balance being refinanced, not the new loan amount.
• Discount points: Some VA loans might require you to pay “points” to get a lower interest rate. One point is equal to 1% of the loan amount.
• Homeowners insurance and property taxes: When you close on a mortgage, the lender will require you to pay homeowners insurance and real estate taxes.
• Appraisal fee: The VA requires a home appraisal for most VA loans to assess the home’s value and confirm the property meets VA standards for safety and livability. VA appraisals usually cost between $525 and $1,300.
• Title search and title insurance: A title company will conduct a title search to look for any ownership disputes and ensure you become the legal owner of the property.

Additional costs can include fees for credit reports and government recording.

What Closing Costs You Can’t Pay

The VA prohibits you from paying certain VA loan closing fees to protect borrowers. These non-allowable fees include:

• Attorney fees
• Real estate broker commissions
• Certain inspection fees
• Prepayment penalties

If a fee isn’t allowed under VA rules, the lender or seller must pay it—not the buyer.

Estimating Your VA Mortgage Loan Closing Costs

Estimating VA loan closing costs is straightforward once you understand the components that make up your total upfront expenses. Here’s how you can get an idea of what your VA loan closing costs might look like:

1. Review your Loan Estimate: Your lender’s Loan Estimate outlines key fees, such as the appraisal, title charges, and prepaid taxes and insurance.
2. Expect 2% to 6% in total closing costs: Your closing costs will vary based on factors like lender, loan size, and location.
3. Include the VA funding fee: This may be paid at closing or financed into your loan.
4. Compare APR, not just rates: When you’re considering different VA loan offers, compare the annual percentage rate (APR) and the interest rate. APR includes many of the closing costs listed above and can give you a better sense of the total cost of a VA loan.

Our closing costs calculator can also help you estimate your closing expenses.

VA IRRRL Closing Costs

When you have a VA loan, you can often refinance it with a VA IRRRL, which is also known as a VA streamline refinance. This type of refinance lets you lower your rate with less paperwork and a faster closing compared to other mortgages.

VA IRRRLs also have closing costs you may have to pay. However, the VA funding fee is significantly lower for IRRRL streamline refinances compared to the fee when you buy a home. You’re currently required to pay a VA funding fee in the amount equal to 0.5% of the loan amount with an IRRRL refinance. Many of these closing costs can be rolled into your loan amount.

How To Reduce Your VA Loan Closing Costs

There are a number of ways you can reduce or eliminate upfront expenses that come with a VA loan, including:

• Negotiate seller credits: Sellers can pay all of your closing costs, plus up to 4% in additional concessions. Credits can cover appraisal fees, title fees, prepaid taxes and insurance, and the funding fee.
• Request lender credits: Lenders may offer credits to reduce closing costs in exchange for a slightly higher interest rate. This can significantly lower your upfront expenses without raising your monthly payment too much.
• Finance the VA funding fee: You can roll the funding fee into the loan amount, reducing the cash due at closing, though this increases your principal and the total interest paid over the life of the loan.

VA Loan Closing Cost FAQs

If you have more questions about fees, taxes, and what to expect at closing time with a VA loan, these answers to frequently asked questions might help.

Can You Roll Closing Costs into a VA Loan?

As mentioned, you can roll the VA funding fee into your VA loan to reduce upfront. Most other closing costs have to be paid out-of-pocket or covered by negotiating seller concessions at closing.

How Do Closing Costs for VA Home Loans Compare to Other Loan Types?

You can generally expect to pay between 2% and 6% of the loan amount in closing fees for VA loans, similar to other types of mortgages. Different loans may have different closing costs, too. For example, conventional mortgages don’t have a funding fee like VA loans, but VA loans have other benefits that conventional loans don’t have that you’ll want to consider when choosing a mortgage.

Are VA Loan Closing Costs Tax-Deductible?

The VA funding fee used to be tax-deductible, but the tax deduction for mortgage insurance premiums (MIP)— the category under which the VA funding fee was allowed to be deducted —expired at the end of 2021.

Other closing costs, such as property taxes and prepaid mortgage interest, may be tax-deductible.

Final Thoughts: Understanding Your VA Loan Closing Costs

It’s important to understand the closing costs you might face with a VA loan so you know what to expect on closing day. By reviewing your Loan Estimate and exploring options like seller or lender credits, you can often reduce your upfront costs.

And because VA loans limit certain fees, you could end up paying less than you would with other mortgage types. If you’re ready to make the most of your VA home loan benefit, get prequalified today to see your personalized loan options.