The seller usually pays closing costs on a VA loan, but the rules are strict about what they can cover

On a VA loan, the seller is required to pay most of your closing costs — this is one of the biggest advantages of the VA program. However, the Department of Veterans Affairs limits which costs the seller can pay and which you must cover yourself. The seller cannot pay certain fees, and you cannot be charged others at all. Understanding the split between seller-paid and veteran-paid costs protects you from overpaying and helps you spot when a lender or title company is breaking VA rules.

The VA does not allow sellers to pay for your VA funding fee (the upfront insurance-like charge), your appraisal, your credit report, or your title insurance — you pay those. The seller must pay for their own real estate agent commission, transfer taxes, and recording fees. Everything else — title search, title examination, closing attorney or escrow fees, homeowners insurance, property taxes, HOA fees, survey costs, and most other settlement charges — the seller typically covers.

Key Takeaways

  • The seller pays most closing costs on a VA loan, but the VA has a specific list of what they cannot pay, and you must cover those costs yourself.
  • You always pay the VA funding fee, appraisal fee, credit report fee, and your portion of title insurance; the seller cannot reimburse you for these.
  • If a seller refuses to pay closing costs or the lender tries to charge you fees the VA forbids, you have the right to walk away or file a complaint with the VA.
  • Closing costs on a VA loan are usually lower than on a conventional loan because the seller absorbs most of them, but you should still review the Closing Disclosure to verify what you are paying.
  • Some costs, like property taxes and homeowners insurance, are prorated between you and the seller based on the closing date, so neither party pays the full amount.

Costs the seller must pay on a VA loan

The VA prohibits sellers from passing certain costs to you. The seller must pay for the title search, title examination, title insurance (the seller's policy), closing or escrow fees, survey costs, pest inspection, homeowners association transfer fees, recording fees for the deed, transfer taxes, and their own real estate agent commission. These are standard settlement costs that come out of the seller's proceeds.

The seller also pays for any repairs or credits required by the VA appraisal. If the appraisal flags a safety issue — a broken railing, a roof leak, faulty wiring — the seller must either fix it or credit you the cost. This is a VA requirement, not a negotiation. The seller cannot charge you to fix a defect the appraisal identified.

Costs you must pay as the veteran

You are responsible for the VA funding fee, which is a one-time charge that ranges from 1.4% to 3.6% of the loan amount, depending on whether you have a disability rating and whether this is your first VA loan. The VA funding fee is not a tax or interest — it is an insurance premium that protects the VA if you default. You cannot ask the seller to pay it, and the lender cannot waive it (except for veterans with a service-connected disability rated by the VA).

You also pay for the appraisal, the credit report, and your portion of title insurance (the lender's policy). Some lenders bundle these into their loan origination fee; others list them separately. Either way, they come from your pocket. You may also pay for a home inspection if you order one — the VA does not require it, so it is optional and typically the buyer's expense.

Costs split between you and the seller

Property taxes and homeowners insurance are prorated based on the closing date. If you close on the 15th of the month, you pay property taxes and insurance for the second half of the month; the seller pays for the first half. The title company or closing attorney calculates the split and adjusts the settlement statement accordingly. Neither party pays the full amount — you each pay your share of the period you own the home.

HOA fees and utilities follow the same logic. If the home is in an HOA, the seller's share of the current month's fee is deducted from their proceeds, and you reimburse them for the portion you owe. Your lender will require you to have homeowners insurance in place before closing, so you will pay the first year's premium upfront; the seller does not contribute to this.

What happens if the seller refuses to pay

If the seller will not pay closing costs, you have options. You can negotiate a higher purchase price to offset the costs you would otherwise absorb, or you can walk away from the deal. The VA does not force sellers to cooperate — it only forbids them from charging you certain fees. If a seller demands you pay for title insurance or closing attorney fees, that is a violation of VA rules, and you can report it to your lender or the VA.

Some sellers in competitive markets try to shift costs to buyers as a negotiating tactic. On a VA loan, this is illegal. If you encounter it, ask your real estate agent or lender to document the seller's demand in writing, then file a complaint with the VA's Loan Guaranty Service or your state's real estate commission. The VA takes these violations seriously because they undermine the program's benefit to veterans.

How to verify closing costs on your Closing Disclosure

Three days before closing, your lender must send you a Closing Disclosure — a standardized form that lists every cost associated with the loan. Review it carefully. Look at the "Seller Paid" column and the "Paid by Others" column. Any cost listed under "Paid by Veteran" that should be seller-paid is a red flag. Common mistakes include lenders charging you for title search or closing fees that the VA says the seller must cover.

If you spot an error, contact your lender immediately and ask them to correct it before closing. Do not close until the Closing Disclosure matches what you and the seller agreed to. If the lender refuses to correct it, you can cancel the loan without penalty — the VA protects you from being forced to close on terms that violate the program rules.

Why VA loans have lower closing costs than conventional loans

Because the seller pays most closing costs on a VA loan, your out-of-pocket expense at closing is typically much lower than on a conventional mortgage. On a conventional loan, the buyer often negotiates to split closing costs or pays them in full. On a VA loan, the seller absorbs the majority, which means you keep more cash at closing. This is one reason VA loans are attractive even in a seller's market — the seller's cost is offset by the fact that VA loans are assumable and backed by the government.

However, this advantage only holds if the seller is willing to cooperate. In a very tight market, some sellers may demand that VA buyers pay closing costs as a condition of sale. This is not legal, but it happens. If you encounter this, your real estate agent should push back or help you find another property. Do not agree to pay costs the VA forbids the seller to charge you.

Frequently Asked Questions

Can the seller pay my VA funding fee?

No. The VA funding fee is one of the few costs you must always pay yourself. The only exception is if you have a service-connected disability rating from the VA, in which case you are exempt from the funding fee entirely — the seller does not pay it because you do not owe it.

What if the seller wants me to pay for the appraisal?

The appraisal is your cost. However, if the appraisal identifies repairs needed to meet VA standards, the seller must pay for those repairs or credit you the cost. You pay the appraisal fee upfront; the seller pays to fix what the appraisal found.

Do I have to pay property taxes at closing?

You pay a prorated share of property taxes based on the closing date. If you close mid-month, you pay taxes for the days you own the home in that month; the seller pays for the days they owned it. The title company calculates this split on the settlement statement.

Can I ask the seller to pay my homeowners insurance?

No. You must pay for the first year of homeowners insurance upfront before closing. The seller does not contribute to this cost. However, if you close mid-year, your lender may allow you to pay a prorated amount for the remainder of the year.

What do I do if the lender tries to charge me for costs the seller should pay?

Contact your lender and ask them to correct the Closing Disclosure. If they refuse, you can cancel the loan without penalty. You can also file a complaint with the VA's Loan Guaranty Service or your state's banking regulator. The VA enforces these rules to protect veterans from being overcharged.