VA Funding Fee Can Be Rolled Into the Loan
Yes, you can roll the VA funding fee into the loan, and that is the most common way Veterans handle it. Financing the fee adds it to your principal balance instead of paying it in cash at closing. That keeps cash to close lower, but it increases the loan amount and slightly increases the monthly payment and total interest.
How financing the fee works
- Zero cash for the fee: Financing means the funding fee is added to the loan balance, so you do not write a separate check for it at closing.
- Payment increases slightly: A higher principal balance means a slightly higher monthly payment and more interest paid over time.
- Best for cash tight buyers: Financing is most useful when you want to preserve reserves for moving costs, repairs, or escrow buffers.
- Check your disclosures: The Loan Estimate and Closing Disclosure should clearly show the funding fee amount and whether it is financed or paid in cash.
The funding fee is usually the only purchase cost you can finance
- VA rule is strict: On most purchase and construction loans, the funding fee is the primary closing cost VA allows to be rolled into the loan.
- Other costs are separate: Appraisal, title, escrow, recording, and lender charges are usually paid in cash or covered by negotiated credits.
- Prepaids still exist: Taxes and insurance escrows can be a big part of cash to close, even when you finance the funding fee.
- IRRRL is different: Streamline refinances can often finance the 0.5% IRRRL funding fee, and some costs can be handled through rate and credit structure.
2026 VA funding fee rates for purchases
| Usage | Zero down | 5% down | 10% plus down |
|---|---|---|---|
| First use | 2.15% | 1.50% | 1.25% |
| After first use | 3.30% | 1.50% | 1.25% |
- IRRRL reminder: VA streamline refinances typically use a flat 0.50% funding fee, and it can often be financed into the new loan balance.
- Loan amount basis: Funding fee is calculated from the loan amount, not simply the purchase price, especially when it is being financed.
Alternatives, seller help, and exemptions
- Seller credits can reduce cash: Seller concessions and credits can cover certain costs when negotiated, and concessions have specific VA limits for certain items.
- Funding fee can be paid by seller: In some deals the seller can pay the funding fee as part of negotiated credits, but the contract and VA concession rules must be structured correctly.
- Exemptions can make the fee zero: Many Disabled Veterans, some Purple Heart recipients on active duty, and eligible surviving spouses can be exempt when status is verified.
- Verify before closing: The cleanest way is having the COE show exempt status so the fee never appears on the Closing Disclosure.
FAQs
Can you roll the VA funding fee into the loan?
Is the funding fee the only closing cost I can finance?
Can the seller pay my VA funding fee instead?
Key Takeaways
- You Can Roll the VA Funding Fee: It’s the only closing cost that can be financed.
- Other Closing Costs Must Be Paid: Lender, title, and prepaid fees must be covered.
- Seller Concessions Are Powerful: Sellers can pay up to 4% in extra costs.
- You Can Raise Price to Roll Costs: Offer higher and ask seller to cover costs.
- Appraisal Must Support It: Home must appraise for higher price to qualify.
- Strategy = Less Upfront Cash: Done right, you can close with no money out.
- Other Help Is Available: Credits, gifts, or aid can also cover closing costs.
- Work With VA-Savvy Pros: The right team ensures your costs get covered.
How to Roll Closing Costs into a VA Loan? (Legally and Strategically)
Technically, you cannot directly roll all closing costs into a VA loan. The only closing cost automatically included in your VA loan amount is the VA funding fee. This is a one-time fee that helps sustain the VA loan program and can be financed into your loan. The funding fee varies based on your military status, down payment (if any), and whether it’s your first VA loan. For example, as of June 2026, the VA funding fee for first-time use with no down payment is typically 2.15% for most regular military members and Veterans. While financing this fee adds to your total loan amount and thus your monthly payment, it significantly reduces your upfront cash requirement.
However, other typical VA loan closing costs — such as:
- Lender fees: Origination fees (capped at 1% of the loan amount by VA), underwriting fees, processing fees.
- Appraisal fees: Cost for the VA-required appraisal to determine the home's value and ensure it meets Minimum Property Requirements (MPRs). These typically range from $500 to $900, varying by location.
- Title and escrow charges: Title search, title insurance (lender's policy is generally required, owner's policy is optional but recommended), escrow fees, recording fees, and notary fees.
- Prepaid items: Homeowner’s insurance premiums (usually 12 months in advance), property taxes (often 2-6 months in advance), and per diem interest (interest from the closing date to the end of the month).
- Other miscellaneous fees: Credit report fees, flood certification fees (if applicable), and survey fees (if required by the state).
— are not automatically rolled in. These costs usually range between 2–4% of the loan amount, depending on your purchase price and local market conditions. For a $300,000 loan, this could mean anywhere from $6,000 to $12,000 in additional costs.
Understanding VA Loan Closing Cost Components
To better visualize the range of typical closing costs you might encounter, consider this breakdown:
| VA Loan Closing Cost Component | Typical Cost Range (Approx.) | Who Typically Pays (Negotiable) |
|---|---|---|
| VA Funding Fee | 0.5% - 3.6% of loan amount | Borrower (can be financed) |
| Loan Origination Fee | Up to 1% of loan amount | Borrower / Seller / Lender |
| Appraisal Fee | $500 - $900 | Borrower / Seller |
| Credit Report Fee | $30 - $70 | Borrower |
| Title Insurance (Lender) | $500 - $1,500+ | Borrower / Seller |
| Escrow/Closing Fees | $500 - $1,500 | Borrower / Seller |
| Recording Fees | $50 - $200 | Borrower / Seller |
| Prepaid Property Taxes | 2-6 months of taxes | Borrower / Seller |
| Prepaid Homeowner's Ins. | 12 months of premium | Borrower / Seller |
| Per Diem Interest | Varies by closing date | Borrower / Seller |
| Survey Fee (if required) | $300 - $500 | Borrower / Seller |
| Attorney Fees (if required) | $400 - $1,000 | Borrower / Seller |
Note: While some fees are "non-allowable" for the Veteran to pay (meaning the lender or seller must cover them), most of the above are "allowable" but can still be negotiated with the seller.
So How Do You Cover VA Loan Closing Costs?
While you can’t simply increase your VA loan amount to cover closing costs on your own, there is a strategy that many smart buyers use: negotiating seller-paid closing costs (also called seller concessions).
Under VA loan guidelines, the seller is allowed to contribute up to 4% of the home’s value toward your closing costs and other expenses. This is completely legal and very common in VA transactions. This 4% concession limit is in addition to standard closing costs that a seller may agree to pay. This means a seller can cover all allowable closing costs plus up to an additional 4% for items like paying off the buyer's debts, funding a temporary interest rate buydown, or even including certain non-standard items in the sale. This flexibility is a significant advantage of VA loans compared to other loan types like conventional (typically 3% limit) or FHA (up to 6% limit).
The Power of Seller Concessions in VA Loans
Seller concessions are essentially contributions from the seller that reduce the buyer's out-of-pocket expenses. They are a powerful tool, especially in a buyer's market or when a seller is motivated to close quickly. For Veterans, this can mean a true "zero out-of-pocket" home purchase, covering everything from the down payment (already waived by VA) to the closing costs and potentially even more.
Examples of what seller concessions can cover (up to 4%):
- Payment of the VA funding fee
- Prepaid property taxes and homeowner's insurance premiums
- Temporary interest rate buydowns
- Paying off buyer's credit cards, collections, or judgments to help them qualify
- Including non-standard items like a new television, appliances, or lawn equipment
It's crucial to understand that standard closing costs (like the appraisal fee, title insurance, or origination fee) are not counted against this 4% concession cap if the seller agrees to pay them. The 4% limit applies to additional contributions that go beyond these typical closing expenses.
How Rolling Closing Costs into a VA Loan Actually Works
Let’s break it down with a practical example to illustrate this powerful strategy:
Let’s say you’re buying a home for $300,000 and need $10,000 to cover your VA closing costs (including the VA funding fee and other typical expenses). The seller is firm on price and doesn’t want to pay that out of pocket.
You might instead offer $310,000 — and ask the seller to contribute $10,000 toward your closing costs.
If the home appraises for at least $310,000, the seller nets their $300,000 (effectively what they wanted for the property), and your closing costs are effectively rolled into your VA loan. You are financing the extra $10,000, which covers your closing costs, into your total loan amount. This allows you to purchase the home with significantly reduced or even zero upfront cash for closing.
This is a legitimate strategy that works within VA loan rules, even though you're not technically adding those fees to the loan — you're just increasing the price and financing them into the total. This method essentially turns what would be out-of-pocket expenses into part of your long-term mortgage.
Here’s how it works step-by-step:
- Make the Offer: You offer $310,000 for the home, including a specific clause requesting the seller contribute $10,000 toward your closing costs.
- Appraisal: The VA-required appraisal is conducted. For this strategy to work, the home must appraise for at least the full $310,000.
- Loan Approval: If the appraisal supports the price, your lender approves a VA loan for $310,000.
- Closing: At settlement, the $10,000 seller concession is applied directly to your closing costs, reducing your out-of-pocket payment to effectively zero (or minimal).
- Net Result: The seller receives their desired $300,000 net, and you've successfully "rolled" your closing costs into your VA loan, financing them over the life of your mortgage.
Key Considerations When Rolling Closing Costs into a VA Loan
While highly advantageous, this strategy requires careful consideration:
1. Appraisal Value Matters
Your lender will base your loan on the lower of the appraised value or purchase price. If the home doesn't appraise for the higher amount (e.g., $310,000 in our example), you'll need to renegotiate with the seller to lower the price to the appraised value, or you will be responsible for covering the difference between the agreed-upon price and the appraised value out of pocket. A low appraisal can halt the transaction if not handled properly.
2. Monthly Payment Impact
For every $1,000 you add to your loan, your monthly mortgage payment increases by roughly $6–$8 (depending on your interest rate and loan term). That’s something to weigh when offering over asking price. While covering closing costs upfront saves you cash, financing them means paying interest on that amount over the life of the loan.
Example Monthly Payment Impact (Approximate)
| Additional Loan Amount | Est. Monthly Payment Increase (30-yr fixed, 6.5% APR) | Total Cost Over 30 Years |
|---|---|---|
| $1,000 | $6.32 | $2,275 |
| $5,000 | $31.62 | $11,383 |
| $10,000 | $63.25 | $22,769 |
| $15,000 | $94.87 | $34,154 |
Calculations are approximate and assume a 6.5% interest rate on a 30-year fixed mortgage. Actual costs will vary based on your specific interest rate, loan term, and loan amount.
3. Use a Comparative Market Analysis (CMA)
Your real estate agent should prepare a Comparative Market Analysis (CMA) before you make an offer. This comprehensive report analyzes recent sales of similar homes in the area, giving you a better idea of what the home is likely to appraise for. This helps prevent appraisal issues when using seller concessions by ensuring your offer price, including the amount for concessions, is realistic given the market value.
4. Market Conditions Matter
In a competitive seller's market, asking for significant seller concessions might make your offer less attractive compared to conventional offers with large down payments or fewer contingencies. However, in a balanced or buyer's market, sellers are often more willing to concede to these requests to secure a sale. Your real estate agent's expertise in local market conditions is invaluable for determining the feasibility of this strategy.
Is Rolling Closing Costs into a VA Loan a Good Idea?
If you want to buy a home with a VA loan and little to no money out of pocket, negotiating for seller-paid closing costs is a powerful strategy. By structuring your offer carefully, you can effectively roll closing costs into your VA loan — while still staying compliant with VA loan guidelines.
This approach, combined with 100% financing through the VA, can truly put you in a position to purchase a home with zero down payment and minimal upfront costs. This makes homeownership incredibly accessible for eligible Veterans and active-duty service members, allowing them to preserve their savings for other important financial goals or for immediate needs after moving into their new home. For many, the long-term benefit of homeownership outweighs the slightly higher monthly payment.
Benefits of This Strategy for VA Buyers:
- Minimizes Out-of-Pocket Expenses: The primary benefit is reducing the cash required at closing, preserving your savings.
- True Zero Down/Zero Out-of-Pocket: When successfully executed, this allows for a home purchase with virtually no upfront costs, beyond earnest money deposits (which are typically returned at closing).
- Financial Flexibility: Frees up your liquid assets for moving expenses, furniture, or an emergency fund.
- Maximizes VA Benefit: Fully leverages the VA loan's no down payment feature by also addressing closing costs.
Potential Drawbacks:
- Higher Loan Amount: Your total loan amount will be higher, leading to a slightly increased monthly mortgage payment and more interest paid over the life of the loan.
- Appraisal Risk: The home must appraise for the inflated purchase price, or the deal may need to be renegotiated.
- Market Competitiveness: In a strong seller's market, offers with seller concessions might be less attractive to sellers than "cleaner" offers.
- Seller Net Proceeds: The seller will still receive their desired net proceeds, but the higher sale price on paper might be a psychological barrier for some.
Ultimately, whether this strategy is a "good idea" depends on your personal financial situation, the specific home, and current market conditions. Consulting with an experienced VA loan specialist and a knowledgeable real estate agent is paramount to determine if this approach aligns with your homebuying goals.
Additional Strategies to Minimize VA Loan Closing Costs
Beyond seller concessions, consider these tactics to reduce your upfront costs:
1. Lender Credits (for a Higher Interest Rate)
Some lenders may offer "lender credits" to offset some or all of your closing costs. In exchange for these credits, you typically accept a slightly higher interest rate on your loan. This means you pay less upfront at closing, but more over the life of the loan in the form of increased interest payments. This can be a viable option if your priority is minimizing immediate out-of-pocket expenses and you plan to sell or refinance within a few years, before the higher interest cost outweighs the upfront savings.
2. Gift Funds from Approved Sources
The VA permits the use of gift funds to cover closing costs. These funds must be a true gift, with no expectation of repayment, and must come from an approved source. Acceptable donors typically include:
- Family members (parents, siblings, grandparents, children, fiancés/domestic partners)
- Close friends with a documented, long-standing relationship
- Employers or labor unions
- Charitable organizations or government agencies that assist homebuyers
A gift letter is required, stating the amount of the gift, the donor's relationship to the borrower, and explicitly confirming that repayment of the gift is not expected. The lender will also require documentation of the transfer of funds.
3. State or Local Closing Cost Assistance Programs
Many states, counties, and even some cities offer various down payment and closing cost assistance programs, some of which are specifically tailored for Veterans. These programs often come in the form of grants (which don't need to be repaid) or low-interest, deferred, or forgivable second mortgages. Research what programs are available in your specific area by contacting your state's housing finance agency or a local Veteran support organization.
4. Shop Around for Lenders
VA loan fees can vary by lender. Obtain Loan Estimates from multiple VA-approved lenders to compare their fees, interest rates, and overall costs. This due diligence can help you identify a lender that offers competitive terms and potentially lower closing costs. Don't be afraid to ask if certain fees are negotiable.
5. Time Your Closing Strategically
Closing towards the end of the month can reduce the amount of prepaid interest you owe. Interest is typically collected from your closing date through the end of that month. A later closing date means fewer days of prepaid interest, saving you some cash upfront.
6. VA Funding Fee Exemption
If you are a Veteran who receives VA compensation for a service-connected disability, or are eligible for it (even if receiving retirement pay instead), you are exempt from paying the VA funding fee. This can significantly reduce your closing costs, as the funding fee can be a substantial portion of the total. Purple Heart recipients and certain surviving spouses are also exempt. Ensure your Certificate of Eligibility (COE) reflects your exemption status.
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Frequently Asked Questions About Rolling Closing Costs into a VA Loan
A8: A knowledgeable real estate agent is crucial. They can help you:
- Analyze the market to determine if sellers are likely to offer concessions.
- Prepare a CMA to ensure your offer price, including concessions, aligns with the home's appraised value.
- Strategically structure your offer to clearly request seller-paid closing costs/concessions.
- Negotiate effectively with the seller and their agent to secure the best terms.
