Understanding VA Loan Closing Costs in 2025
If you’re a veteran or service member looking to buy or refinance a home with a VA loan, understanding the closing costs involved is crucial.
VA loans offer unique advantages—like no down payment and no private mortgage insurance—but they also come with specific fees and expenses.
This guide explains how much VA loan closing costs typically are, how the VA funding fee is calculated, and which fees sellers can pay.
You’ll also learn about strategies to reduce or manage these costs, from negotiating with lenders to applying for down payment assistance. Get ready to make your VA homebuying experience seamless.
In this Article
What Are VA Loan Closing Costs?
VA loan closing costs are the fees associated with finalizing a mortgage backed by the U.S. Department of Veterans Affairs. Although the VA loan program spares borrowers from private mortgage insurance (PMI) and requires no down payment, it still comes with specific closing expenses.
These can range from 2% to 6% of the loan amount, depending on factors like lender fees, state regulations, and the property’s location.
- Origination Fee: The origination fee is typically up to 1% of the loan amount, covering lender processing and administrative tasks.
- VA Funding Fee: A one-time funding fee supports the VA loan program, the VA funding fee can be rolled into the loan or paid upfront.
- Appraisal Fee: The Appraisal fee is usually around $500 (varies by location) to confirm the property meets the minimum VA property standards.
- Title Insurance: Protects against title issues; cost varies by state and can be several hundred dollars.
- Prepaid Expenses: Includes homeowner’s insurance, property taxes, and other escrow items paid at closing.
- Recording Fees: Local government charges to record the property’s change of ownership.
- Discount Points (Optional): Used to buy down your interest rate, typically 1% of the loan amount per point.
Under VA guidelines, certain allowable costs can be charged to the veteran, while non-allowable costs (such as attorney fees in some states) must be covered by other parties (often the lender or seller). For Veteran first-time homebuyers or those interested in a VA refinance, understanding how much these fees typically amount to is crucial for budgeting.
Typical VA Closing Costs Breakdown
| Cost | Typical Range | Who Pays? | Allowable? |
|---|---|---|---|
| Origination Fee | Up to 1% of loan | Buyer | Yes (capped at 1%) |
| VA Funding Fee | 0.5%–3.6% of loan | Buyer (can be financed) | Yes |
| Appraisal Fee | $400–$600 | Buyer | Yes |
| Title Insurance | $300–$1,000+ | Buyer/Seller (negotiable) | Yes |
| Prepaids (Escrow) | Varies by lender & location | Buyer | Yes |
| Recording Fees | $50–$200 | Buyer | Yes |
| Discount Points | 1% of loan per point | Buyer (optional) | Yes |
The VA Funding Fee
The VA funding fee is a one-time payment that helps maintain the VA loan program. It can range from 0.5% for certain refinance loans to 3.6% for subsequent uses with no down payment. You have the option to roll this fee into your loan balance, though doing so increases your total debt and the amount of interest you’ll pay over time.
Funding Fee Exemptions
- Service-Connected Disability: Veterans receiving VA disability compensation are exempt from the funding fee.
- Surviving Spouse: Surviving spouses of veterans who died in service or from a service-connected disability may be exempt.
- Other Exemptions: In some cases, active-duty personnel who have received a Purple Heart may also qualify.
Funding Fee Chart
| Down Payment | First-Time Use | Subsequent Use |
|---|---|---|
| None | 2.3% | 3.6% |
| 5%–9.99% | 1.65% | 1.65% |
| 10% or more | 1.4% | 1.4% |
Real-World VA Closing Cost Scenarios
| Loan Amount | $200,000 (First-Time Use, 0% Down) | $300,000 (First-Time Use, 0% Down) | $500,000 (Subsequent Use, 0% Down) |
|---|---|---|---|
| VA Funding Fee | 2.3% = $4,600 | 2.3% = $6,900 | 3.6% = $18,000 |
| Origination Fee | Up to $2,000 | Up to $3,000 | Up to $5,000 |
| Appraisal Fee | $400–$600 | $400–$600 | $500–$700 |
| Title & Other Costs | $800–$1,200 | $1,000–$1,400 | $1,200–$1,600 |
| Total Estimate | $7,800–$8,400+ | $11,300–$12,100+ | $24,700–$25,300+ |
Note: These figures are examples. Actual costs may vary based on your lender, state-specific fees, and whether you finance the funding fee.
Allowable vs. Non-Allowable Costs Under VA Guidelines
The VA sets limits on what fees veterans can be charged.
Allowable costs: Include the origination fee, appraisal fee, credit report, title insurance, recording fees, and reasonable discount points.
Non-allowable costs: Can include certain attorney fees and settlement charges that must be covered by the lender or seller.
Comparing VA Closing Costs vs. FHA & Conventional
| Cost Type | VA Loan | FHA Loan | Conventional Loan |
|---|---|---|---|
| Upfront Fee | VA Funding Fee (0.5%–3.6%) | 1.75% Upfront MIP | None (PMI if <20% down) |
| Mortgage Insurance | None | Monthly MIP | PMI may apply <20% down |
| Down Payment | 0% | 3.5% min. | 3%–20% |
| Typical Closing Costs | 2%–6% of loan | 2%–6% of loan | 2%–5% of loan |
While FHA and conventional loans may have comparable closing cost percentages, VA loans often provide a net savings thanks to the absence of monthly mortgage insurance premiums and flexible seller concessions.
Strategies to Minimize VA Closing Costs
1. Negotiate with Sellers
Seller concessions for VA loans can cover up to 4% of the loan amount. This can include paying for the VA funding fee, appraisal costs, and other closing expenses.
2. Compare Multiple Lenders
Different lenders may offer varying interest rates and fee structures. Getting at least three Loan Estimates can help you find the best deal.
3. Explore Down Payment Assistance Programs
Some states and nonprofit organizations offer assistance that can help cover closing costs. While VA loans don’t require a down payment, these programs may still provide grants or low-interest loans for closing expenses.
4. Consider Lender Credits
A lender credit allows you to roll some closing costs into a slightly higher interest rate. This can reduce your upfront expenses but may cost more in interest over time.
Common Misconceptions About VA Closing Costs
Myth: VA loans have no closing costs
Fact: VA loans limit some fees but do not eliminate all closing costs. Buyers are still responsible for expenses like appraisals, title insurance, and lender charges.
Myth: The VA pays all closing costs
Fact: The Department of Veterans Affairs does not pay any closing costs. The VA only guarantees a portion of the loan. All closing fees must be paid by the borrower, seller, or lender.
Myth: Sellers are required to pay all closing costs
Fact: Sellers are not required to pay any closing costs unless negotiated. They may contribute up to 4% of the purchase price toward concessions, including some closing expenses.
Myth: You can’t negotiate VA loan closing costs
Fact: VA loan costs are often negotiable. Buyers can ask lenders to reduce fees, compare Loan Estimates, and request seller contributions to reduce out-of-pocket costs.
Myth: The VA funding fee is the only cost
Fact: The VA funding fee is just one part of the total closing costs. Other expenses may include escrow fees, title insurance, appraisal fees, and recording charges.
Myth: Veterans are exempt from all fees
Fact: Only veterans receiving VA disability compensation are exempt from the VA funding fee. All other typical closing costs still apply unless covered through concessions or credits.
Myth: You can roll all closing costs into the loan
Fact: Only the VA funding fee can be rolled into the loan in most cases. Other costs must be paid upfront unless offset by lender credits or negotiated concessions.
Myth: All lenders charge the same VA loan closing costs
Fact: Closing costs can vary significantly between lenders. Comparing rates and fee structures is crucial to finding the most affordable option.
How State & Lender Variations Affect Closing Costs
State regulations can influence fees like property transfer taxes and recording charges, while lender policies can affect origination fees and discount points. Some states have higher average attorney fees, and certain municipalities impose additional taxes. This is why it’s crucial to:
- Compare at least three lenders.
- Understand your state’s specific taxes and fees.
- Review all documents for accuracy and fairness.
Relationship Between Closing Costs, Interest Rates & Overall Loan Cost
There is a direct connection between the interest rate you pay and your VA loan closing costs. For instance, opting for discount points can lower your interest rate but increases your upfront costs. Conversely, lender credits can reduce your upfront expenses by charging you a higher interest rate over the life of the loan.
“Choosing between paying discount points or accepting lender credits depends on how long you plan to stay in the home. Calculate your break-even point to make the smartest decision.”
— John Smith, VA Loan Officer with 15+ years of experience
Frequently Asked Questions
What are VA loan closing costs?
VA loan closing costs encompass fees and expenses required to finalize a VA-backed mortgage. These typically include the VA funding fee, appraisal fees, title insurance, recording fees, and loan origination charges. While the VA limits certain fees, borrowers should expect closing costs to range from 3% to 6% of the loan amount.
How much is the VA funding fee?
The VA funding fee varies based on factors such as loan type, down payment, and prior VA loan usage. For first-time users with no down payment, the fee is typically 2.15% of the loan amount. Subsequent use without a down payment increases the fee to 3.3%. Making a down payment can reduce the fee, and certain veterans may be exempt.
Who pays VA loan closing costs?
While buyers are responsible for most closing costs, the VA prohibits them from paying certain fees. Sellers can contribute up to 4% of the home’s value toward closing costs and concessions, which can include paying off debts or covering the VA funding fee.
Can I roll closing costs into a VA loan?
Generally, only the VA funding fee can be financed into the loan amount. Other closing costs must be paid at closing. However, in certain refinance scenarios, some closing costs may be rolled into the new loan.
Are VA loan closing costs negotiable?
Yes, many closing costs are negotiable. Buyers can negotiate with lenders to reduce or waive certain fees and can also request seller concessions to cover some costs. Shopping around for lenders can also help in finding lower fees.
What fees are veterans prohibited from paying?
The VA restricts veterans from paying certain fees, including attorney fees (except for title work), brokerage fees, and prepayment penalties. These non-allowable fees must be covered by the lender or seller.
Can the seller pay my VA funding fee?
Yes, the seller can pay the VA funding fee as part of the 4% maximum seller concessions. This can be negotiated during the purchase agreement process.
Are VA loan closing costs tax-deductible?
The VA funding fee is tax-deductible in the year it’s paid, provided you itemize deductions. Other closing costs may not be deductible. Consult a tax professional for personalized advice.
When are VA loan closing costs due?
Closing costs are typically due at the loan closing. Buyers should receive a Loan Estimate early in the process and a Closing Disclosure at least three days before closing, detailing the exact costs.
How can I reduce VA loan closing costs?
To reduce closing costs, consider negotiating with the lender for lower fees, requesting seller concessions, comparing offers from multiple lenders, and closing at the end of the month to minimize prepaid interest.
