The Bottom Line Up Front

Closing costs on a VA loan are split between the buyer, the seller, and the lender. The buyer pays allowable fees like the appraisal, credit report, title insurance, and recording fees. The seller can cover the buyer’s closing costs without a cap and contribute up to 4 percent of the loan amount in additional concessions. The key is knowing which costs the VA allows each party to pay.

The VA restricts what buyers can be charged. VA’s general fee rules restrict brokerage charges, but a current temporary variance under VA Circular 26-24-14 and its 2024 change allows eligible Veteran borrowers to pay reasonable and customary buyer-broker compensation on qualifying purchase transactions. The amount must satisfy the circular’s conditions and be disclosed correctly on the Closing Disclosure. Buyer-broker compensation is negotiable; Veterans are not required to pay it simply because the variance permits it. The lender origination charge is subject to VA’s flat 1% rule. The VA funding fee runs 2.15% on a first-use purchase with no down payment, though Veterans who meet VA’s exemption criteria are exempt. Verify status with your lender. Sellers face no limit on paying the buyer’s standard closing costs. The 4 percent concession cap applies separately to extras like prepaid taxes, rate buydowns, and the funding fee itself.

What Are VA Loan Closing Costs?

VA loan closing costs fall into the same broad categories as any other mortgage, but the VA restricts which fees the buyer can be charged. The split matters. Federal regulation caps the origination fee at 1 percent of the loan amount and defines a specific list of allowable charges. Everything outside that list is non-allowable, meaning the buyer cannot pay it regardless of what the contract says.

The VA funding fee is separate from standard closing costs, but it appears on the same settlement statement. It can be financed into the loan balance rather than paid at the table. Veterans with a qualifying disability rating are exempt from that fee, which removes one of the largest single line items from the entire transaction. On the seller side, there is no dollar cap on how much a seller can contribute toward the buyer’s allowable closing costs, but seller concessions covering items beyond standard costs are capped at 4 percent of the total loan amount.

What the Buyer Pays at Closing

VA buyers pay the allowable fees outlined in VA regulations, but the charge that creates the cash-to-close surprise is the initial escrow deposit. The servicer holds several months of property taxes and homeowners insurance premiums in advance, and the total depends on where the closing date falls in the local tax collection cycle. Budget for this separately.

Per diem interest adds another layer. This charge accrues from the closing date through the end of the month, so a closing early in the month means more days of per diem charges than a closing at month end. Borrowers who hear no down payment and no private mortgage insurance assume the settlement check is negligible. The escrow deposit and per diem interest together push cash to close beyond that expectation, particularly where property taxes are collected annually and the servicer requires a larger upfront cushion.

Non-Allowable Fees: Costs VA Buyers Cannot Be Charged

VA regulation starts from a strict default: no charge shall be made against the borrower except those expressly permitted. Any fee not on the allowable list is non-allowable and falls to the lender or the seller. Which charges the buyer can face depends on origination structure. Under a flat 1 percent origination fee, processing, underwriting, and document preparation charges cannot be billed to the buyer as separate line items because the flat fee covers them. Under an itemized model, those charges can appear on the borrower’s side as long as the combined origination total stays at or below 1 percent.

Two categories are prohibited regardless of origination model. No brokerage or service charge can be passed to a VA buyer under any structure. No charge for obtaining the VA loan guaranty can reach the borrower. These are blanket restrictions with no workaround. The Loan Estimate is where these rules show up on paper, and every line item billed to the borrower should be checked against the allowable list before the closing date. A non-allowable charge in the borrower column needs to be moved to the lender or seller side before settlement proceeds.

What the Seller Pays at Closing on a VA Loan

Sellers on a VA transaction can pay all of the buyer’s standard closing costs with no dollar limit from the VA. Seller concessions are a separate category, capped at 4 percent of the home’s reasonable value. The two buckets work independently. Total seller contributions can far exceed the concession cap when unlimited closing cost credits stack on top.

The 4% Seller Concession Rule and How It Works

The 4 percent seller concession cap restricts only items outside normal closing costs. Seller-paid title, escrow, recording fees, and origination charges are exempt from that cap because they are standard costs the seller covers without restriction. Concessions cover different ground: temporary rate buydowns, prepaid taxes beyond the initial escrow deposit, payment of the buyer’s outstanding debts, or credits the buyer would otherwise need to handle out of pocket.

That distinction drives the purchase offer math. A temporary buydown funded by the seller is a concession. Same for a seller credit toward the VA funding fee when the contract structures it as a concession rather than a standard closing cost. Both count against the cap. If the total exceeds 4 percent, the contract needs amendment or the buyer covers the difference at closing. Loan officers who flag this at the offer stage prevent a scramble during final underwriting review, when reclassifying a single line item on the contract can change the cash-to-close number and push the closing date.

What the Lender Can Pay or Credit Back

Lenders can credit back part or all of a VA buyer’s closing costs by building the expense into the interest rate. The cost does not vanish. The tradeoff is a higher rate for the life of the loan, which shifts the real expense from closing day into every monthly payment the buyer makes.

Who Pays the VA Funding Fee?

The buyer owes the funding fee, but the full amount can move off the closing check. Financing rolls it into the loan balance. A lender credit absorbs it through a higher rate. A seller contribution covers it as a standard closing cost. Veterans who qualify for an exemption skip the fee with no substitute charge.

Who Pays for the VA Termite Inspection?

Veterans may pay for a wood-destroying pest inspection when required by the VA Notice of Value, per VA Circular 26-22-11. Pest inspections are not on the VA’s list of allowable borrower charges, so the cost falls on the seller, the lender, or the buyer’s real estate agent. This restriction catches sellers off guard when they have not sold to a VA buyer before, because on other loan types the buyer can pay for the pest inspection without the same regulatory restriction.

How to Negotiate Closing Cost Responsibility

Every closing cost on a VA purchase has a negotiation path. The purchase contract controls who pays what. The loan application determines whether a lender credit offsets part of the buyer’s cash requirement. Combining seller contributions with a lender credit can bring cash at closing close to zero, but the full structure needs to be set before the purchase agreement is signed.

Write seller-paid closing costs into the initial purchase contract rather than waiting to negotiate them after inspection. On the lender side, requesting loan estimates with and without a credit shows exactly how the monthly payment changes at each rate option, making the rate and cash tradeoff concrete before the buyer locks in a loan structure.

Sample VA Loan Closing Cost Breakdown

A VA purchase closing disclosure assigns every charge to the buyer, the seller, or a lender credit. The split is negotiable. Every allowable buyer charge can move to the seller through the purchase contract, and a lender credit funded by a higher interest rate can offset those charges at the cost of a permanently higher monthly payment. Below is a fee-by-fee breakdown showing who pays by default and how each charge can shift.

The funding fee is the only charge on this list that can be rolled into the loan balance rather than paid at the closing table. Every other buyer-side fee requires cash at settlement unless a seller credit or lender offset covers it. Brokerage fees, service charges, and any cost not on the VA’s allowable list cannot appear on the buyer’s settlement statement. The seller’s real estate commission and transfer taxes sit outside the buyer-side closing cost structure and do not count toward the concession cap.

The Bottom Line

VA loan closing costs split across three parties, and the purchase contract determines where each charge lands. The buyer pays only what VA regulation expressly permits. Everything else falls on the seller, the lender, or the agent. Sellers can cover all standard closing costs without limit and contribute up to 4 percent of the purchase price toward concessions. Lender credits absorb the buyer’s remaining charges by trading a higher interest rate for lower cash at closing.

The funding fee, the single largest closing expense for most VA buyers, can be financed into the loan balance, covered by a seller contribution, or offset by a lender credit. Exempt Veterans owe no funding fee. Every dollar on a VA closing statement has a negotiation path. The purchase offer and loan application together determine whether the buyer writes a check or shifts that cost elsewhere.