The seller usually pays closing costs on a VA loan, but the rules are strict

With 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, there are limits on what the seller can cover, and you may still owe certain fees yourself. The VA sets a cap on seller concessions, meaning the seller cannot pay more than a set percentage of the home's purchase price, typically 4 percent. If closing costs exceed that amount, you pay the difference.

The reason for this rule is that the VA wants to prevent sellers from inflating prices to cover excessive closing costs, which would artificially raise the loan amount you need to borrow. By capping what sellers can contribute, the program protects both you and the lender.

Key Takeaways

  • The seller must pay most closing costs on a VA loan, but only up to 4 percent of the home's purchase price.
  • You cannot be charged a VA funding fee by the seller, and the seller cannot require you to pay discount points to lower the interest rate.
  • Certain costs like appraisals, credit reports, and title insurance are often paid by you upfront, though the seller may cover them as part of their concession.
  • If closing costs exceed the seller's 4 percent cap, you pay the overage, but you can negotiate with the seller to cover more if both parties agree.
  • Some lenders allow you to roll closing costs into the loan amount, which means you borrow the money instead of paying it at closing.

What closing costs the seller must cover

The seller is responsible for paying your real estate agent commissions, title insurance, title search, recording fees, and transfer taxes — these are standard seller costs in any home sale. On a VA loan, the seller also cannot charge you a VA funding fee, which is a percentage of the loan amount that compensates the VA for guaranteeing the loan. If a seller tries to pass this fee to you, that violates VA rules and your lender will catch it during underwriting.

The seller also cannot require you to pay discount points, which are fees paid upfront to lower your interest rate. This protects you from being pressured into paying extra money just to make the deal work. Any costs related to the seller's side of the transaction — their attorney, their inspection, their repairs — are their responsibility.

What you typically pay yourself

Even though the seller covers most costs, you usually pay for the appraisal upfront, which ranges from $400 to $600 depending on the home's location and value. You also typically pay for your credit report, which costs $15 to $50. Some lenders charge an underwriting fee or processing fee that you pay directly, though these vary by lender.

If you have a VA loan with a lender that allows it, you can sometimes roll these costs into the loan amount instead of paying them at closing. This means you borrow the money rather than bringing a check. Ask your lender whether they allow this — not all do, and it increases the total amount you owe over time because you pay interest on those fees.

How the 4 percent seller concession cap works

The seller can contribute up to 4 percent of the purchase price toward your closing costs. On a $300,000 home, that means the seller can pay up to $12,000. If your actual closing costs total $14,000, you owe the remaining $2,000. The seller cannot be forced to pay more than 4 percent, and if they do, the VA will reduce the loan amount to match the cap.

This cap exists to keep loan amounts reasonable and prevent sellers from artificially raising prices. However, you and the seller can negotiate separately — if the seller wants to contribute more than 4 percent, they can do so, but the VA will not count anything above 4 percent toward your closing costs. Instead, any amount over 4 percent would be treated as a price reduction or a gift, which changes how the loan is calculated.

Negotiating closing costs with the seller

You can ask the seller to cover closing costs as part of your offer, and many sellers will agree because they know VA loans come with this expectation. Include a line in your purchase agreement stating that the seller will pay closing costs up to a specific amount, usually 4 percent of the purchase price. Your real estate agent or attorney can help you word this correctly.

If the seller refuses to pay closing costs, you have options. You can ask your lender whether you can roll costs into the loan, you can negotiate a lower purchase price to offset the costs, or you can walk away and make an offer on a different home. In a competitive market, sellers may push back, but in a slower market, most sellers will agree to cover closing costs on a VA loan because it makes the sale more likely to close.

The VA funding fee and how it works

The VA funding fee is a one-time charge that compensates the VA for guaranteeing your loan. It ranges from 1.4 percent to 3.6 percent of the loan amount, depending on whether this is your first VA loan use and whether you are putting money down. This fee is paid to the VA, not to your lender, and it is typically rolled into your loan amount so you do not pay it upfront.

The seller cannot pay your VA funding fee — this is a hard rule. If a seller offers to cover it, your lender will reject that offer. However, the funding fee is already included in your loan amount, so you are not paying it separately at closing. Some VA borrowers are exempt from the funding fee, including those receiving VA disability compensation and surviving spouses of service members who died in service.

When you might pay closing costs yourself

If you are buying a home from a private seller who does not understand VA loan rules, they may refuse to pay closing costs. In that case, you can still proceed — you just pay the costs yourself or roll them into the loan. You can also ask your lender for a list of closing costs and shop around, because some lenders charge lower fees than others.

If you are buying a foreclosed home or a property owned by a bank, the bank may refuse to pay closing costs. Banks often have strict policies about what they will and will not cover. In these situations, you have less negotiating power, but you can still ask and see what the bank will cover. If the bank refuses, you can factor those costs into your decision about whether to make an offer.

Frequently Asked Questions

Can I ask the seller to pay more than 4 percent of closing costs?

Yes, you can ask, but the VA will only count 4 percent toward your closing costs. If the seller agrees to pay more, anything above 4 percent is treated as a price reduction or gift, which changes how your loan is calculated. Your lender can explain how this affects your loan amount and monthly payment.

What if the seller refuses to pay closing costs?

You can pay them yourself, roll them into the loan amount if your lender allows it, or negotiate a lower purchase price to offset the costs. You can also walk away and make an offer on a different home. In many markets, sellers expect to pay closing costs on VA loans, so refusal is less common.

Does the VA funding fee count toward the 4 percent seller concession cap?

No. The VA funding fee is rolled into your loan amount and is not part of closing costs. The 4 percent cap applies only to actual closing costs like title insurance, appraisals, and recording fees. The funding fee is separate and cannot be paid by the seller.

Can I roll my appraisal and credit report fees into the loan?

Some lenders allow this, but not all. Ask your lender directly whether they will roll these costs into the loan amount. If they do, you borrow the money instead of paying it at closing, but you pay interest on it over the life of the loan.

What happens if closing costs are lower than 4 percent of the purchase price?

The seller pays the actual closing costs, which will be less than 4 percent. The 4 percent is a cap, not a requirement. You do not owe the difference, and the seller does not have to pay more than the actual costs.