How VA Loan Closing Costs Are Different

When it comes to VA loan closing costs, they’re not quite the same as the closing costs associated with a conventional home loan.

Closing costs are fees you pay to a lender as the final step in homeownership. They typically run 3 to 5 percent of the loan amount, and that is true for both types of loans. 

Closing costs will typically cover fees for:

• Loan Origination
• Appraisals
• Title Insurance
• Taxes
• Homeowners Insurance (typically the first year is paid at closing)
• Private Mortgage Insurance (PMI)
• Mortgage Points (fees paid in exchange for a lower interest rate)
• Attorney
• Closing or Escrow

The buyer typically pays closing costs for conventional loans, although sellers may sometimes pay all or part depending on the terms.

The closing costs are split three ways for VA loans – between the buyer, seller, and lender.

• The seller covers commissions for the real estate agents (for both the buyer and seller). This cannot be more than 4 percent of the total home loan.
• The buyer covers closing costs such as the VA funding fee, loan origination fee, mortgage points, appraisal fee, title insurance, and others.
• The lender typically covers the attorney fees.

Closing costs for both types of loans are due when you sign your final paperwork. For conventional loans, there is an option to roll them into the mortgage. For VA loans, you can do the same but only for some of the closing costs. Typically, you can lean on seller or lender concessions to cover the rest if you do not have the upfront cash to bring to the table.

Here are some of the other ways that VA loan closing costs differ:

You’ll Pay a VA Funding Fee

A VA funding fee is a one-time fee to the U.S. Department of Veterans Affairs to support the VA home loan program. The fee helps ensure that military service members and veterans will continue to have access to the program in the future.

Specific Fees Are Not Allowed

There is a limit on the fees that a military service member or veteran can be charged in VA loan closing costs. Here are the non-allowable fees:

• Attorney fees charged by the lender
• Commission or fees for the real estate broker or agent
• Fees associated with determining whether the home is in a flood zone

The Appraisal Fee is Different

Before you buy a home, there is always an appraisal.

With a VA home loan, there is a special VA appraisal involved. It aims to guarantee that the dwelling is safe for military service members, veterans, and their families.

The fee typically runs between $425 and $875 and is included in the closing costs.

If you have questions about VA loan closing costs, we are happy to help. Contact us with your questions. 

We’d also like to share this handy closing cost calculator so you can get an idea of how much closing costs can run.

Finally, for a walk-through of the closing process, which is the last, critical step in the homebuying journey, visit our Closing Process guide.