Everything You Need to Know About VA Closing Costs

VA loans are a handy way for military members to get onto the housing ladder without the need for a down payment.

However, there are still costs you’ll need to pay, called VA closing costs. This can potentially be a roadblock if you’re unaware of what they are and how they work. Fortunately, there are ways to eliminate or prepare for VA closing fees (we will share those below).

Here are the answers to common questions military buyers ask to ensure that they fully understand the ins and outs of this expense.

What are VA home loan closing costs?

Closing costs are fees you need to pay to a lender when you take out a mortgage to buy a home. It’s a broad term that can encompass title search or home appraisal as well as any admin for servicing your loan.

But VA loan closing costs are slightly different in a few ways. Here’s what you need to know:

Limited origination fee

One way they differ is through the origination fee. Lenders will typically charge this fee to process the loan. However, with a VA loan, there are set limits on what the lender can charge.

Lenders can’t charge more than 1% of the total loan amount as an origination fee if it’s a VA loan. However, this isn’t a massive difference from traditional loans which usually have origination fees between 0.5% – 1% of the loan amount.

Non-allowable fees

Another great thing about VA loans is that you can avoid certain fees that you’d usually get with a traditional loan. The Veteran’s Administration has guidelines in place that help keep fees to a minimum.

VA funding fee

This is another big difference between VA loans and traditional loans. The VA funding fee is a unique cost to taking out a VA loan.

It’s a one-time fee you need to pay to the Department of Veterans Affairs, and it’s designed to support the VA home loan program for others. How much you need to pay will depend on your down payment and loan amount. If you put down a greater down payment, your funding fee will be a smaller percentage of the loan amount.

VA appraisal fee

When buying a home, you will typically have to pay an appraisal fee as well, which can look different if you’re using a VA loan.

VA loans come with a special VA appraisal fee which is usually between $400 to $900, although some can be higher than this.

Other VA Inspection Fees

It’s possible that your home may require an additional VA inspection(s) if the property has specific characteristics. Here are a few potential costs that may arise in some cases:

• VA Termite Inspection – $400-$500
• Well Inspection (for homes with a well water system) – $350-$500
• Septic Inspection (for homes with a septic system) – $300-$500
• Survey – $350-$750
• Elevation Certificate (for homes in flood hazard areas) – $300 -$500
• Foundation Certification (for a manufactured home) – $300 -$500

How much are closing costs on a VA loan?

When it comes to closing costs, there’s no fixed amount as it depends on your specific loan and home purchase. Most homebuyers using VA loans can expect to pay between 3% to 5% of the total value of the loan.

Will a seller cover VA closing costs?

For the VA closing costs that you can’t roll into your mortgage, you may be able to get the lender or seller to apply concessions to bring that upfront cash cost down.

In some cases, a seller may agree to pay the buyer’s property taxes for a while or the buyer’s title insurance. However, just because some sellers agree to pay closing costs doesn’t mean they all will. In fact, for VA home loans, the maximum a seller can contribute is 4% of the loan.

You may also find that in the current hot property market that sellers are less inclined to cover closing costs to sweeten the deal. When sellers offer to cover closing costs, it’s often for properties they’ve struggled to sell, which is happening far less in this market.