VA Loan Closing Costs: What You’ll Really Pay

For a lot of folks, a big perk of going the VA loan route is no money down and no PMI. But you’ve got to remember: closing costs still come into play. These can run anywhere from 2%–6% of your total loan amount. So, if you’re buying a $300,000 home, you could be on the hook for another $6,000 to $18,000 out of pocket if you don’t plan carefully.

The good news is, with a clear grasp of how closing costs and the VA funding fee work—and a few insider strategies—you can keep that extra cash right where it belongs: in your bank account. Below, I’ll walk you through each fee, why it matters, and what you can do to cut your overall costs.

VA loan closing costs are the various fees that pop up before you can cross the finish line on your home purchase. They generally cover lender charges, third-party services (like the appraisal or title work), and the one-time VA funding fee that helps keep the loan program running.

Buyers typically pay:

• VA Funding Fee: Typically 2.3% of the loan amount for first-time use with 0% down, going up to 3.6% for subsequent uses. (If you look at older charts, you’ll see 2.15% and 3.3%. Those figures were updated in 2020.)

• Appraisal Fee: Usually around $600–$800, though this can vary by state.

• Loan Origination Fee: Capped at 1% of the loan amount.

Other standard expenses like credit reports and certain administrative fees.

Sellers can (but don’t have to) contribute up to 4% of the loan amount in concessions. Importantly, these “concessions” can go toward things like paying off your debts or buying down your interest rate, but normal closing costs (e.g., the appraisal fee or typical title fees) generally fall outside that 4% cap.

Lenders often handle their own attorney fees or admin costs differently from state to state. Some states require attorneys at closing; in others, you won’t see an attorney fee at all. Either way, the VA restricts how much lenders can charge veterans in certain categories, which can help keep your tab lower than with other types of loans.

Pinning down an exact number is tricky because local taxes, your lender’s fee structure, and the home’s price all factor in. But as a rule of thumb:

For a $300,000 purchase, that’s about $6,000 to $18,000 in closing fees (including the funding fee if you pay it at closing rather than rolling it in).

• VA Funding Fee: Roughly $6,900–$10,800 on a $300,000 loan if you’re at 2.3% or 3.6%.

• Origination Fee (1%): Up to $3,000 on a $300,000 loan.

• Appraisal: $600–$800, give or take.

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Think of the VA funding fee as the program’s replacement for monthly mortgage insurance. Because the VA doesn’t require PMI, they use this fee to help manage the costs of backing loans for veterans and active-duty service members.

Typically at closing, although most borrowers roll it into the loan balance so they don’t have to fork over cash on the spot.

Veterans with qualifying service-connected disabilities, certain Purple Heart recipients, and some surviving spouses. If you fall under any of these categories—or end up qualifying for VA disability after closing—you might get the fee waived or even refunded.

Below is a more current look at funding fee percentages. (Note that older charts might show slightly different rates; these took effect in 2020.)

Let’s say you borrow $300,000 on your first home with no money down. You’d owe about $6,900 (2.3%) as the funding fee. Put 5% down instead, and that fee dips closer to 1.65%, saving a solid chunk of change.

1. Gain Exemption: If you have a documented service-connected disability or meet other specific VA criteria, you might not owe this fee at all.
2. Offer a Larger Down Payment: At 5% down or 10% down, the fee goes down a notch. Even if 5% isn’t required, it can lower your overall costs significantly.
3. Roll It In: If you’d rather not pay thousands upfront, add the funding fee to your loan balance. Just remember you’ll pay interest on it over time.

You may even use a gift letter for mortgage funds to help with upfront costs, provided it complies with VA rules.

When you see “2%–5%” or “2%–6%,” that typically covers a bundle of lender fees, third-party fees, and local costs. Here are some common items:

1. VA Funding Fee: 1.4%–3.6%, depending on usage and down payment.
2. Appraisal Fee: $600–$800 for a VA-approved appraiser.
3. Origination Fee: Up to 1% of the loan (e.g., $3,000 on a $300,000 loan).
4. Title Insurance: $500–$1,500, protecting you and the lender from ownership disputes.
5. Prepaid Expenses: This includes escrow for property taxes, homeowners insurance, and daily loan interest.

Under VA rules, you cannot typically fold standard closing costs (like the appraisal fee or title insurance) into your loan—only the funding fee. But you can reduce your out-of-pocket hit by:

• Using Seller Concessions: The seller can pay certain costs (up to 4% of the loan amount in “concessions”).

• Negotiating Lender Credits: Some lenders will cover a portion of your fees in exchange for a slightly higher interest rate. This can work out if you don’t plan on staying in the home for the full term.

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Seller concessions can be a game-changer for keeping your cash in hand. The VA allows up to 4% of the loan in concessions to be applied toward things like:

• Paying off your existing debts to qualify for the loan more easily.

• Funding a temporary interest rate buydown (e.g., a “2-1 buydown”).

• Covering the VA funding fee or even items like prepaid taxes and homeowners insurance.

The VA specifically caps “seller concessions” at 4% of the loan amount, not the home’s purchase price. But note that normal closing costs—like title insurance, the appraisal fee, or a credit report—don’t count toward that 4% limit. It’s mainly for extras that go beyond standard closing items.

1. Reduced Upfront Costs: Seller contributions can slash your out-of-pocket expenses.
2. Debt Management: If you’re tight on your debt-to-income ratio, concessions can help you clear a debt or two to lock down the loan.
3. Interest Rate Buydown: Lowering your interest rate for the first year or two can save you hundreds a month initially.

If you're bringing a large sum later, some conventional loans let you recast your mortgage to lower payments—though this isn’t typical for VA loans.

Chat with your real estate agent about asking for the seller’s help. Sometimes sellers will foot a big chunk of your fees if it means a faster, more seamless closing—especially in a cooler market.

Technically, a “no closing cost” loan doesn’t exist. Lenders who advertise it typically roll fees into the rate (a “lender credit”). That might help you keep cash upfront, but pay attention to the long-term cost. You’ll want to compare how much more you’d pay in interest over time.

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Honestly, yes. Between zero down, no PMI, and often lower rates (on average ~0.5% lower than comparable conventional loans), VA financing saves many borrowers a good chunk of change each month. And if you have an exemption from the VA funding fee, that’s icing on the cake.

Better yet, with strategic seller concessions (that 4% is no joke) plus reAlpha’s zero buyer-agent commission model, you might chop your closing costs by up to 80%. Combining both can get you surprisingly close to paying next to nothing at closing.

Beyond savings, VA loans come with unique benefits—like assumability VA loan rules like assumability can make your home more appealing to future buyers.

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• Buyer’s Agent Commission (3%): $12,000

• Other Closing Costs: Let’s estimate roughly 3.75% of $400,000 = $15,000

• Total Closing Costs: $27,000

• Seller Concessions (Up to 4% of Loan Amount): If you’re putting 20% down, your loan’s $320,000, and 4% of that is $12,800.

• ReAlpha Buyer’s Agent Fee Removed (3% on $400,000): $12,000

• Total Potential Savings: $12,800 + $12,000 = $24,800

So from that $27,000 in closing costs, you’re now down to about $2,200. That’s a major drop. Depending on the exact fees and negotiations, you could land even closer to zero.

Some closing costs—like prepaid interest or property taxes—may qualify. Check with a tax professional for personalized guidance.

If you later receive or prove entitlement to VA disability compensation effective before your closing date, you might snag a funding fee refund. Reach out to your regional VA loan center for details.

No. There’s no penalty for paying off your VA loan early.

The VA doesn’t enforce a hard cap on loan sizes these days, though individual lenders have their own caps based on your credit and income. Loan limits can also vary by county for jumbo VA loans.

ReAlpha is an AI-driven real estate platform that nixes the traditional 3% buyer’s agent commission, which can keep thousands of dollars in your pocket. On a $300,000 home, that’s an easy $9,000 saved right off the bat. Plus, you’ll get round-the-clock support from Claire, an AI agent designed to make the home-buying process faster, cheaper, and more transparent.

By understanding your closing costs, leveraging seller concessions, and maybe using reAlpha’s zero-commission model, you can walk away with more cash in hand—and still enjoy those sweet benefits the VA loan program has to offer. If you have any questions or want to explore your options, reach out anytime. I’m here to help you make a confident, money-savvy move.