VA Loan Closing Costs 2024 | Fees & Requirements

VA home loan closing costs & fees

VA loans do not require a down payment — in fact, that’s one of the most important benefits of this loan program.

However, VA borrowers will have to pay closing costs, including the VA funding fee. VA closing costs can be anywhere from 1 to 5 percent of the total loan amount, depending on the cost of the home.

VA closing costs can be paid out-of-pocket, covered by seller concessions and lender credits, or financed into the total loan amount.

In this article (Skip to...)

• What are VA closing costs?
• How much are VA mortgage closing costs?
• How to avoid paying out-of-pocket closing costs
• VA refinance closing costs
• VA closing costs FAQ
• The bottom line

What are VA closing costs?

Closing costs are the expenses that, in addition to the down payment, are paid at closing.
Here are the most common closing costs for VA mortgages:

• VA funding fee: This one-time cost is paid to the U.S. Department of Veterans Affairs, and funds the VA loan program.
• Loan origination fee: Private lenders charge this fee to cover the costs of administrative services.
• Discount points: Borrowers have the option to pay upfront to access a lower interest rate.
• VA appraisal fee: Before finalizing the loan, the lender will order an independent appraisal of the home to ensure the sale price appropriately reflects the property value.
• Inspection fee: A home inspection ensures that the home is safe and habitable.
• Title report fee: The loan process includes a title search to determine whether anyone else might be able to claim ownership of the property. Borrowers will have the option to buy title insurance, which can help to settle any future title claims, should they arise.
• Recording fee: A local government fee to record the home purchase.
• Credit report fee: The lender will charge a fee to cover the cost of pulling the borrower’s credit report.
• Flood certification fee: An assessment to determine whether the new home is located in a flood, which may require the borrower to purchase flood insurance.
• Survey fee: Often, a surveyor will assess and mark the boundaries of the property.
• Attorney fee: Legal fees for an attorney who will organize the details of the real estate transaction.
• Prepaid items: In some cases, borrowers may be required to pay some property taxes or homeowners insurance fees upfront.

Not every VA loan will require every cost. For example, a borrower seeking a VA streamline refinance (also known as a VA Interest Rate Reduction Loan, or IRRRL) for an existing VA mortgage won’t need to pay the inspection and appraisal fees. Those costs will only apply to a home purchase loan.

Some of these closing costs, like the VA funding fee, are calculated as a percentage of the total loan amount, while others are flat costs.

How much are VA mortgage closing costs?

VA closing costs typically cost between 1 and 5 percent of the total loan amount. So, for example, closing costs for a $200,000 mortgage could be between $2,000 and $10,000.

Much of that variability is due to the VA funding fee, typically a significant component of closing costs, which can be anywhere from 0.5 and 3.6 percent, depending on a number of factors, including the type of loan and the nature of the borrower’s military service.

Below are some rough estimates for the amount of some of the more notable closing costs. Keep in mind that these amounts could vary greatly by geographic location and your costs may be different.

The best way to determine what your closing costs will be is to speak with a mortgage professional.
Still, the following could give you a sense of potential cost.

VA mortgage & lender fees

The VA sets limits on how much the lender can charge, which is one of the benefits of the VA loan program.

VA funding fee

• Amount: 0.5 to 3.6 percent of the loan amount
• Paid to: U.S. Department of Veterans Affairs

The VA funding is paid to the Department of Veterans Affairs, and funds the VA loan program, allowing it to be entirely self-sustaining.

The amount of the fee varies, based on a number of factors including the type of loan and the nature of the borrower’s military service.

For example, a first-time homebuyer could expect to pay at least 2.3 percent of the loan amount, while a VA homeowner seeking a VA refinance could pay just 0.5 percent.

However, most VA borrowers don’t pay this fee out of pocket and instead finance the funding fee into the overall loan, which means that they’ll pay it over time with monthly payments.

Loan origination fee

• Amount: Cannot exceed 1 percent of the loan amount
• Paid to: VA-authorized private lender

The VA limits lender compensation to 1 percent of the total loan amount. This fee is intended to cover the expenses associated with processing and underwriting the loan.

For a $200,000 loan, a 1 percent loan origination fee would be $2,000.

Discount points

• Amount: 1 percent of the loan amount buys a 0.25 percent rate reduction
• Paid to: VA-authorized private lender

Discount points allow the borrower to “buy down” the mortgage interest rate. This is optional but could save the homebuyer money if they keep the loan for long enough.

Discount points don’t count toward the 1 percent maximum origination fee.

Discount points cannot be financed into the loan amount when purchasing a home.

Third-party fees

In addition to the borrower and the lender, there are other entities involved in the home loan transaction; these are called third parties.

Examples of third parties are title and escrow companies, credit reporting agencies, and appraisers. Their charges are referred to as third-party fees.

Here are common third-party fees and the estimated amounts.

Appraisal

• Amount: Varies by region but cannot exceed $875 for a single-family home
• Paid to: Passes through the lender to the appraiser

A VA appraiser will determine the property value and confirm that it meets the VA’s Minimum Property Requirements (MPRs).

An appraisal is not required for a VA streamline refinance, so this fee won’t apply.

Title report/title insurance policy

• Amount: Varies, usually between $300 and $1,500
• Paid to: Passes through the lender to the service provider

This cost is variable because it is based on the home purchase price, the loan amount and the geographic location.

The title fee for an inexpensive home may be only a few hundred dollars, while an expensive home could run well over $1,000.

Both the title report and title insurance protect the lender and owner should someone else claim ownership of the property and win in court. Under those conditions, the title insurance company would reimburse both the lender and owner for the financial loss.

Depending on where you live, the seller and buyer may be responsible for different portions of the title insurance, which can mean a difference of hundreds of dollars. Make sure your contract specifies which parties are responsible for what so there are no surprise fees.

Recording fee

• Amount: Varies, usually between $20 and $200
• Paid to: County or city government

This fee is imposed by the local government and covers the cost of “recording’“ the home purchase or refinance. Recording makes the transaction public record so the county knows who is responsible for paying taxes on the property and which banks have loans out on the home.

Credit report fee

• Amount: $35 to $45
• Paid to: Passes through the lender to the service provider

This fee covers the cost of pulling a credit report for the borrower.

Flood certification

• Amount: $20
• Paid to: Passes through the lender to the service provider

A flood certification determines whether the property is in a flood zone. If so, the borrower may need to purchase flood insurance.

Survey fee

• Amount: $300 to $400
• Paid to: Passes through the lender to the service provider

A surveyor will review the property to show you where the physical property lines are. This is required for all transactions in some places, while elsewhere will only be necessary if the property lines are questioned or disputed.

Attorney fees

• Amount: $400 to $1,000
• Paid to: Your closing attorney

An attorney helps negotiate and clarify the sales contract. Not all states require an attorney to be involved in mortgage transactions. In states that do require them, it’s best to find an attorney who specializes in real estate.

The VA does not permit the borrower to pay the attorney for anything related to the home purchase besides title work.

How to avoid paying closing costs out-of-pocket

Generally, the homebuyer is responsible for paying most (if not all) of a loan’s closing costs. However, it can be possible for VA borrowers to avoid these expensive charges in a few different ways, including:

Seller concessions

The VA loan program allows the seller to cover some closing charges, up to 4 percent of the home price. Of course, the seller is not required to pay that much but it may be possible to negotiate.

Closing cost assistance

A local closing cost assistance program in your area may be able to help you pay for some of your closing costs. Closing cost programs vary significantly by location.

Some closing cost programs offer forgivable loans or grants to pay for closing fees while others offer no-interest loans that are repaid when the loan is sold, refinanced, or paid off.

Talk to your loan officer about programs in your area.

Financing closing costs

The VA loan program allows borrowers to roll closing costs into the total loan amount so, rather than paying them in one chuck at closing, it’s possible to pay them over the life of the loan.

Lender credits

Your lender could help pay closing costs in exchange for a higher mortgage rate over the life of the loan.
Basically, this is a similar strategy to financing upfront costs: you’ll pay less immediate relief in exchange for higher long-term costs.

VA refinance: How much are closing costs?

The closing costs for a VA loan are a little different when refinancing. Borrowers can expect to pay between 0.5 and 3.3 percent, depending on the type of refinance they are seeking.

Because the VA funding fee constitutes such a large portion of the closing costs for a VA loan this could significantly affect the total closing costs.

VA closing costs FAQ

How much are closing costs on a VA loan?

VA loan closing fees can range from 1 to 5 percent of the home purchase price. Costs are variable, as some closing costs are flat while others are calculated as a percentage of the loan amount. Even with these costs, the VA home loan program is likely to be a great option for eligible borrowers, compared to FHA or conventional loans.

What is the VA funding fee?

The VA funding fee is a percentage of the loan amount, paid at closing, that helps to sustain the VA loan program. Thanks to the VA funding fee, the Department of Veterans Affairs is able to operate the VA loan program as a self-sustaining benefit for military borrowers.

Will I have to pay the VA funding fee?

Most VA borrowers must pay the VA funding fee, though the VA waives this cost under certain circumstances, including for disabled veterans injured in the line of duty or for surviving spouses of service members killed in the line of duty. Purple Heart recipients on active duty are also eligible to waive the VA funding fee.

How can I avoid closing costs on a VA loan?

You can’t avoid closing costs but you can avoid paying them out-of-pocket, by asking for seller concessions, applying for closing cost assistance, or financing them into your total mortgage loan amount.

Are VA loans less attractive to sellers?

The VA regulates real estate transactions to protect VA borrowers from excessive costs. Some sellers may interpret the VA’s regulations as complex or restrictive but this should not deter eligible VA borrowers from using their VA home loan benefit.

What closing costs can a VA buyer not pay?

The VA will not allow homebuyers to pay attorney fees beyond title work, sales commissions for real estate agents, termite remediation letters, or lender’s fees exceeding 1% of the loan amount.

What credit score is needed for a VA loan?

The VA doesn’t set a minimum credit score but VA lenders will have their own qualifying requirements. Generally, you’ll need a credit score of 620 or higher to obtain a VA loan.

Can a VA loan be denied?

Yes, lenders can deny a VA loan application. While the VA insures these loans, making this type of loan more attractive to lenders, they cannot require a lender to approve a mortgage loan.

What is the VA 1 percent rule?

VA guidelines stipulate that military borrowers can not be charged more than 1 percent of the loan amount for certain non-allowable fees, including the mortgage lender’s charges for originating, processing, and underwriting the loan.

Can you roll closing costs into a VA loan?

Yes, VA borrowers can roll their closing costs, including the VA funding fee, into their total loan amount. That said, the VA will now allow financing for discount points, except for VA cash-out refinances or VA streamline refinances.

Can a VA buyer pay their own closing costs?

Yes, VA homebuyers can pay their own closing costs.

Does the VA cover closing costs?

No, the VA does not pay closing costs on behalf of VA borrowers. However, VA borrowers can apply for closing cost assistance through third-party programs.

Do sellers pay closing costs for VA loans?

VA borrowers can ask for seller concessions up to 4 percent of the total loan amount.

Who pays closing costs on a VA loan?

The borrower is responsible for paying the closing costs on the VA loan, though they can ask for seller concessions and lender credits, or apply for closing cost assistance.

The bottom line: VA loans & closing costs

Even with the VA funding fee, the VA home loan program is likely to be an attractive option for borrowers who meet the eligibility requirements. The VA home loan program is intended to bring homeownership within reach for active-duty service members, veterans, and surviving spouses, and, as such, offers significant advantages.

Thanks to the VA guarantee, the VA loan program could represent significant savings. These benefits are likely to off-set the expense of the VA funding fee, including:

• No down payment
• No mortgage insurance
• Competitive mortgage rates (compared to FHA or conventional mortgages)

An experienced VA loan officer can help you evaluate whether a VA loan is right for your financial situation, and get you started on the VA loan process.