VA loans do have closing costs, but the rules about who pays them are different from conventional mortgages
You will have closing costs on a VA loan. The difference is that the seller, not you, must pay most of them. Federal law prohibits lenders from charging you origination fees, discount points, or most other lender fees. The seller can be required to cover your closing costs as part of the purchase agreement — and in many markets, they do.
What you might still owe depends on the specific costs involved, your state's laws, and what the purchase contract says. Some costs are always yours. Others can be negotiated or waived. Understanding which is which before you make an offer protects you from surprises at closing.
Key Takeaways
- Federal law bars lenders from charging you origination fees, discount points, or appraisal fees on a VA loan.
- The seller can be required to pay your closing costs, and many do in competitive markets.
- You are always responsible for property taxes, homeowners insurance, and HOA fees if applicable.
- Your VA funding fee (a one-time payment to the VA) is the largest cost you control, and you can roll it into the loan amount instead of paying it upfront.
- State and local recording fees vary widely and may fall to you or the seller depending on local custom and your contract.
Costs the lender cannot charge you
The VA sets a list of fees that lenders are prohibited from charging on a VA loan. This list includes origination fees (also called loan fees), discount points, appraisal fees, credit report fees, and underwriting fees. These are costs that would normally appear on a conventional mortgage closing statement. On a VA loan, they cannot.
Lenders can charge you for costs that are not on the prohibited list — title search, title insurance, recording fees, and transfer taxes — but even these can often be negotiated into the seller's side of the closing statement. The VA does not forbid the seller from paying them on your behalf.
If a lender tries to charge you any prohibited fee, report it to the VA's Loan Guaranty Service or to your state's banking regulator. This is a violation of your loan terms.
The VA funding fee and whether you pay it upfront
The VA funding fee is a one-time payment to the Department of Veterans Affairs, not to the lender. It is the largest cost you will encounter on a VA loan, and it is yours to pay — the seller cannot be required to cover it. The amount depends on your branch of service, whether this is your first VA loan, and how much you are putting down.
For most first-time users with no down payment, the funding fee is 2.3 percent of the loan amount. If you put down 5 percent or more, it drops to 1.63 percent. If you put down 10 percent or more, it is 1.25 percent. Surviving spouses and disabled veterans rated by the VA at 0 percent or higher do not pay a funding fee at all.
You do not have to pay the funding fee at closing. You can roll it into your loan amount, which means you finance it over the life of the mortgage instead of paying a lump sum upfront. This is common and does not disqualify you or change your loan terms. The tradeoff is that you pay interest on the funding fee over time.
Costs that are always your responsibility
Certain costs cannot be shifted to the seller no matter what. Property taxes are prorated between you and the seller based on the closing date — you pay your portion. Homeowners insurance is yours; the lender will require proof of a policy before closing. If the property is in a flood zone, flood insurance is also required and is your cost.
HOA fees, if the property is in a homeowners association, are your responsibility going forward, though the seller may owe a prorated share up to closing. Inspections and surveys that you order are your cost. If you hire a real estate attorney (required in some states), that is your cost.
These are not lender fees — they are costs of homeownership or costs you choose to incur — so the VA's fee restrictions do not apply to them.
What the purchase contract should say about closing costs
Your purchase agreement is where you negotiate who pays what. Many VA loan buyers include language that the seller will pay all closing costs except the VA funding fee and property taxes. This is a standard request in many markets and is often accepted, especially in a buyer's market.
If the seller refuses, you have options. You can ask the seller to cover only certain costs — title insurance, for example. You can offer to split costs. Or you can decide to cover them yourself if the home price is right. The contract is negotiable; there is no single rule.
Before you make an offer, ask your lender for a Loan Estimate, which shows all costs the lender can and cannot charge. This document tells you exactly which fees are prohibited and which ones might appear. Bring it to your real estate agent so you both know what to negotiate.
State and local recording fees and transfer taxes
Recording fees and transfer taxes vary by state and county. Some states have no transfer tax at all. Others charge 1 to 2 percent of the sale price. Recording fees (the cost to file the deed and mortgage with the county) range from under $100 to several hundred dollars depending on where the property is.
Responsibility for these costs is not set by federal law — it depends on local custom and your contract. In some states, the buyer traditionally pays recording fees; in others, the seller does. Transfer taxes are sometimes split, sometimes paid entirely by one party. Your real estate agent should know the local practice, but the contract is what matters. Write into your offer who pays what.
Frequently Asked Questions
Can I roll the VA funding fee into the loan amount?
Yes. You do not have to pay it at closing. You can finance it as part of your mortgage, which means you pay it back over 15, 20, or 30 years with interest. This is a common choice when you do not have cash available at closing.
What if the seller won't pay my closing costs?
You can negotiate. Many sellers will cover at least some costs, especially title insurance and recording fees. If the seller refuses entirely, you can cover them yourself, ask for a price reduction instead, or walk away. The contract is where this gets decided.
Do I have to pay an appraisal fee?
No. The lender cannot charge you for the appraisal on a VA loan. The lender orders and pays for it. If you order a separate appraisal for your own reasons, that cost is yours.
Are property taxes due at closing?
Property taxes are prorated. You pay the seller for the taxes owed from the closing date forward until the end of the tax year. The seller pays for the time they owned it. The exact amount depends on your county's tax rate and closing date.
What happens if I don't have enough cash for costs I owe?
Talk to your lender about rolling costs into the loan if possible. Some costs, like the funding fee, can be financed. Others, like property taxes and insurance, cannot. If you are short on cash, negotiate the purchase price or ask the seller to cover more costs before you close.