How Much Are Closing Costs on a VA Loan? A Complete Breakdown

Every mortgage comes with closing costs (even those advertised as “no closing cost” loans). A home loan is a product, and like any kind of good or service, there are related costs.

So, what exactly is included in “closing costs” for a VA loan? As it turns out, “closing costs” is really a catchall term for any cost or fee required to finalize your mortgage. Some closing costs represent underwriting and processing fees, while others involve third-party expenses like homeowners insurance and property taxes.

Getting a VA loan for your home purchase can be an exciting process. As a veteran or active military member, you’ve earned the right to take advantage of this amazing program. But before you get too far down the road, it’s important to understand all the costs involved – including closing costs. In this comprehensive guide, we’ll break down exactly how much you can expect to pay in closing costs on a VA loan.

What are closing costs?

Closing costs are fees charged to process, underwrite, and close your mortgage. They cover things like the origination fee, appraisal, credit check, taxes, title fees, and more. Closing costs are typically between 1-6% of your total loan amount. With a VA loan, the seller can cover up to 4% of the purchase price in closing costs through seller concessions.

VA loan closing costs

Here are some common fees and costs that are part of VA loan closing costs:

VA funding fee: This fee helps fund the VA loan program and varies between 1-3% of your loan amount depending on your down payment and whether it’s your first VA loan. It can be paid upfront or rolled into your loan.
Origination fee: Lenders charge this fee to originate your loan, up to 1% of the loan amount.
Discount points You can pay these upfront to lower your interest rate Each point costs 1% of your loan amount
Appraisal fee: Costs $400-$1,200 depending on the property. It’s required to establish value.
Credit report fee: Up to $50 to check your credit.
Title insurance Protects against issues with the legal ownership claim, Split between lender and owner policies,
Recording fees: To record your deed and mortgage documents. Charged by local government.
Property taxes: A portion of your annual property tax bill due at closing.
Homeowner’s insurance: Required insurance paid monthly, with a portion due upfront.
Daily interest charges: Interest accrued from closing date through month’s end.
HOA fees: If applicable, any homeowners association dues.

What impacts closing costs?

Several factors can influence how much you’ll pay in VA loan closing costs:

Your down payment: The VA funding fee decreases as your down payment increases. With 10% or more down, it drops to 1.25%.
Loan amount: Most fees are based on a percentage of your loan, so a higher loan amount equals higher fees.
Location: Recording fees/taxes vary by state and county. Appraisal fees depend on local housing costs.
Credit: Lower credit means higher rates and fees in some cases. Good credit keeps costs down.
First VA loan: The funding fee is lower for your first VA loan vs. a subsequent VA loan.
Seller concessions: Negotiate with the seller to cover closing costs. This can significantly reduce your out-of-pocket costs.

Average closing costs for a VA loan

So how much can you expect to pay in total closing costs with a VA loan? Here are some averages:

VA purchase loan: Between 1-4% of the loan amount. On a $300,000 loan, that’s $3,000-$12,000.
VA streamline refinance: Around $2,500 – $5,000 in total costs.
VA cash-out refinance: Between 3-6% of the loan amount.

Of course, your exact costs depend on your specific loan scenario, credit, and property. Work with a lender to get a detailed closing cost estimate tailored to you.

Tips for saving on VA loan closing costs

Here are some tips to keep your closing costs in check:

Shop around with multiple lenders for the best rates/fees
Buy down your rate with points strategically
Ask the seller to cover closing costs in your offer
Pay the VA funding fee in cash rather than rolling it into loan
Maintain good credit
Make a larger down payment if possible
Close at the end of the month to lower prepaid interest

Even with closing costs, a VA loan is an incredible deal for eligible veterans, active military, and spouses thanks to perks like no monthly PMI and no down payment requirement. Just be sure to budget appropriately and utilize strategies to minimize expenses. This ensures the loan remains affordable and the homebuying process goes smoothly.

Frequency of Entities

VA loan: 23
Closing costs: 16
VA funding fee: 5
Down payment: 4
Origination fee: 3
Appraisal fee: 2
Title insurance: 2
Recording fees: 2
Property taxes: 2
Homeowner’s insurance: 2
Daily interest charges: 1
HOA fees: 1
First VA loan: 1
Seller concessions: 1

how much are closing costs on va loan

How do VA loan closing costs differ from other mortgages?

In general, the only closing cost that is specific to the VA loan is the VA funding fee. However, some closing costs on VA loans have additional guidelines set by the VA, such as a limit on the origination fee that lenders can charge and a limit to the type of closing costs that Veterans can pay.

Let’s take a look at how the VA regulates closing costs for a VA loan:

The VA loan origination fee rule limits the amount a lender can charge for originating a VA loan to 1% of the loan amount.

VA lenders can either charge you a flat 1% fee or itemize your loan origination fees, so long as they don’t exceed 1%. If the lender isnt charging the flat 1% fee, then the VA allows buyers to pay for some fees that would otherwise be non-allowable.

Non-allowable fees on a VA loan are expenses the Department of Veterans Affairs (VA) prohibits the buyer from paying when the lender charges the flat 1% origination fee. The goal is to ensure Veterans and service members using their VA loan benefit can purchase homes without paying additional items that the VA considers overhead.

See our complete list of non-allowable fees for 2024.

VA home loan buyers are required to get a VA appraisal. The VA sets costs for appraisals, not the lender. VA appraisal fees vary from $400 to $1200 depending on where you’re buying and must be paid upfront.

Seller Concessions on VA Loans

A seller concession on a mortgage is any cost the seller pays that is not required of them.

With a VA loan, seller concessions are limited to 4% of the total loan price.

Some of the most common VA loan seller concessions include:

As long as you stick to that 4% cap, the sky’s the limit when it comes to asking for concessions. But remember that seller concessions are not required, so this will always be a product of negotiation between buyer and seller.

Before you begin negotiations, you’ll need to know exactly what you want to ask for. Let’s take a look at closing costs on a VA loan.

Who Pays In VA Closing Costs?

FAQ

How much are closing costs in VA?

Average closing costs for Virginia range from 2% to 5% of the total loan amount. The average amount is about $3,425 for a $200,000 mortgage. That is just less than 2% of the loan amount and slightly more than the national average of $3,160.

Do you pay closing costs on a VA loan?

You’ll have to pay the closing costs when you’re signing the final paperwork of your home mortgage process. At the mortgage closing, you’ll have to bring any down payment and closing costs for the loan – although it’s important to note here again that mortgages insured by the VA don’t typically require a down payment.

What is the VA 1% rule?

The VA loan origination fee rule limits the amount a lender can charge for originating a VA loan to 1% of the loan amount. VA lenders can either charge you a flat 1% fee or itemize your loan origination fees, so long as they don’t exceed 1%.

What is the funding fee for a VA loan?

What is the VA Funding Fee? The VA funding fee is a one-time fee paid to the Department of Veterans Affairs. While most Veterans pay 2.15%, this fee ranges from 0.5% to 3.3%, depending on the loan type, if you’ve used a VA loan before or if you have a down payment greater than 5%. Want to estimate your VA funding fee?

What are the closing costs for a VA home loan?

For a VA home loan, closing costs include a range of fees similar to other loans, with the VA funding fee being specific to VA loans. This fee, which covers the possibility of the loan not getting repaid, ranges from 1.4% to 3.6%. The amount of the funding fee depends on two factors.

Are all VA closing costs transaction fees?

Not all VA closing costs are transaction fees. They can be categorized into two groups: loan costs and other non-loan costs.

How much does a VA loan cost including fees?

VA loans involve several costs, including funding fees between 1.40% and 3.60% and VA-approved home appraisals, which are typically more expensive than FHA or conventional appraisals by around $400 to $700. The funding fee depends on your down payment and previous VA loan use.

Do veterans owe closing costs?

A VA mortgage offers a tantalizing benefit for current and veteran military members: No down payment is required. But you’ll still owe closing costs to finalize a home loan backed by the U.S. Department of Veterans Affairs. Don’t let these final costs scare you off from buying a home — or catch you off guard. How much are VA loan closing costs?