The Quick Read: A VA loan removes the down payment, but it does not remove closing costs. You cover them through a mix of levers: financing the funding fee, seller-paid costs, lender credits, and your own cash. On a purchase, only the funding fee can be rolled into the loan. Everything else gets paid, negotiated away, or offset.
Here is the shape of it. A first VA loan with full entitlement offers 100% financing with no mortgage insurance, as long as the price is not above the appraised value. Cash to close is a separate question. Think of the down payment and closing costs as two different bills. VA wipes out the first one. The second one needs a plan.
VA payment estimate
Starting assumptions reflect an example price with no down payment and a first-use funding fee. Replace them with your own figures.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a VA loan quote.
Illustrative starting assumptions: a $350,000 price, no down payment with full entitlement, a first-use funding fee financed into the loan, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a VA loan quote; your rate is set by the lender at lock. The funding fee follows VA’s published table for the use and down payment entered; the residual-income figure is VA’s guideline for the region and family size, and the rough residual shown subtracts only the housing payment and the debts entered, while VA also deducts taxes, maintenance and utilities. Taxes, insurance and dues are editable estimates; closing costs are not included. Licensed in sixteen states for consumer mortgages. Lendmire is not affiliated with or acting on behalf of the Department of Veterans Affairs.
That plan matters more on active duty. Orders shift, a move date gets set for you, and your savings may be tied up in a PCS. This article walks through what the costs are, who can pay what, how to stack the levers, and where the general rules break. Everything about program mechanics is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Key Takeaways
- A VA purchase loan has no required down payment and no mortgage insurance, but closing costs still exist.
- Only the VA funding fee can be financed on a purchase. Other closing costs and prepaids cannot be rolled in.
- Sellers may pay closing costs and concessions, but it is negotiated, not guaranteed.
- Lender credits cut cash at closing but are typically paired with a higher interest rate for the life of the loan.
- Funding-fee exemptions have deadlines. On active duty, timing your paperwork before closing can matter.
Key Terms Defined
Closing costs. The upfront costs of getting the loan and transferring ownership of the home, paid at or before closing.
Funding fee. A one-time VA charge on most VA loans that helps keep the program running. It can be paid in cash or added to the loan.
Prepaids. Items you pay in advance at closing, such as the first year of homeowners insurance and some property taxes.
Seller concession. Something the seller pays for you beyond your normal, customary closing costs, such as paying off your debts or covering the funding fee.
Lender credit. A rebate that offsets closing costs, typically given in exchange for a higher interest rate.
Certificate of eligibility (COE). The VA document that confirms you qualify for the benefit. VA decides eligibility, and service requirements are VA’s rules.
Cash to close. The total you bring to the table: down payment plus closing costs, minus any deposit already paid, seller credits, and other adjustments.
What Do Closing Costs Actually Include on a VA Purchase?
Think in three buckets: the funding fee, standard costs, and prepaids. Each one has different rules about who can pay and whether it can be financed.
Bucket one is the funding fee. For a first use, the fee is 2.15% with less than 5% down, 1.5% with 5% to under 10% down, and 1.25% with 10% or more down. A second or later use runs 3.3% with less than 5% down, with the same 1.5% and 1.25% tiers above that. VA News publishes one table that applies to veterans, active-duty service members, and National Guard and Reserve members alike. So being on active duty does not put you in a higher tier. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Bucket two is standard costs. These include the VA appraisal, credit report, title examination and insurance, recording fees, survey, and flood zone determination. a VA program notice 26-17-11 lists these as common allowable items. The same circular says lenders must document allowable fees, plus any lender and seller credits, on the Closing Disclosure.
Bucket three is prepaids. That means the first insurance premium, current-year taxes, and the starting deposit into your escrow account. These are real cash, and they scale with the home and the closing date.
There is also a limit on what a lender can charge for its own work. Under VA’s regulations at 38 CFR Part 36, a lender may charge a flat fee of up to 1 percent of the loan in place of other origination charges that are not expressly allowed. Only scheduled items can hit your bill. You are not stuck with a pile of random junk fees.
VA loans do have closing costs. The no-money-down feature applies to the down payment, not to the whole closing table.
Who Pays What? A Quick Matrix
The answer-first version: you can pay scheduled costs, the seller can pay if the contract says so, and a lender can offset costs with a credit. Only the funding fee can be financed on a purchase.
| Cost | Buyer pays | Seller may pay | Can be financed |
|---|---|---|---|
| Funding fee | Yes, if not exempt | Yes, counts as concession | Yes |
| VA appraisal | Yes | Yes | No |
| Credit report, title, recording | Yes | Yes | No |
| Prepaids and escrows | Yes | Yes, counts as concession | No |
| Lender origination (up to 1%) | Yes | Yes | No |
The rule behind the “No” column comes from 38 CFR 36.4313, which says closing costs and prepaids may not be included in a VA purchase loan. Refinances work differently, since closing costs can be included in refinance loans. That rule does not carry over to your first purchase.
Seller-Paid Costs vs. Seller Concessions
This is where first-time VA buyers get tripped up. The distinction is real, and it is easy to blur in a contract.
Sellers are allowed to pay your customary closing costs on a VA loan. Separately, VA lets sellers contribute concessions of up to 4 percent. Concessions cover items beyond normal closing costs. Commonly cited examples are the funding fee, prepaid taxes and insurance, and payoff of your debts.
Two details matter. First, the 4 percent is generally measured against the VA reasonable value on the Notice of Value, not necessarily the contract price. Second, the split between “closing costs” and “concessions” drives how much room you have. Spend the cap on the wrong item and you may leave your actual closing costs uncovered.
Contract language is the practical risk. If an offer says the seller will pay “closing costs and funding fee,” those two items can be treated differently. Your lender and agent should confirm how each line is classified before you sign, because the classification follows VA’s rules, not the wording that sounds natural.
Also remember: seller payment is permitted, not required. Sellers agree to it or they don’t. In a strong seller’s market, you may get a polite no. We cover that fallback below.
The Five Levers for Covering Cost
Each lever has a catch. Most buyers use two or three together.
Lever 1: Finance the funding fee
This is the only cost you can roll into a VA purchase loan. It lowers your cash at closing. The tradeoff is simple: a bigger loan balance and a bigger monthly payment. The fee may be paid in cash or included in the loan. Use this lever when cash is tight and you plan to hold the home for a while.
Lever 2: Seller-paid closing costs
Put the request in the purchase agreement. The Closing Disclosure then shows it either as a lump-sum seller credit or as seller-paid line items. This works best when the home has been on the market a while or the seller wants a clean, certain buyer. Active-duty buyers with a COE in hand and a lender-ready file are often easier for sellers to say yes to.
Lever 3: Seller concessions beyond closing costs
This is the 4 percent bucket. Use it for the funding fee, prepaids, or a buydown if the negotiation allows it. Keep a running tally so you know how much of the cap you have used.
Lever 4: Lender credits
A lender credit is a rebate that offsets closing costs. The catch is that, per the Consumer Financial Protection Bureau, credits are typically given in exchange for a higher interest rate. That lowers your cash today and raises your monthly cost for the life of the loan. It can be the right call if you plan to refinance or move on a short horizon. It is the wrong call if you plan to stay put for many years.
Lever 5: Your own cash
Savings, or gift funds where the lender permits. This is the plain-vanilla option, and for many buyers it fills whatever gap the other levers leave. Honest advice: build a small closing fund early if you can, even with VA’s no-down-payment feature. A buffer keeps you from taking a worse deal under pressure.
Which Lever Fits Which Situation?
The decision depends on cash, market, and timeline. Here is how the tradeoffs usually line up.
| Your situation | Lever to lean on | Main tradeoff |
|---|---|---|
| Very tight cash | Finance fee + ask seller for costs | Larger balance; seller may say no |
| Seller’s market | Finance fee + lender credit | Higher rate for life of loan |
| Hard PCS deadline | Own cash + financed fee | Less room to negotiate |
| Staying many years | Cash + seller help; skip credit | More cash up front |
| Short hold, may refinance | Lender credit | Higher rate if you stay |
A lender credit solves today’s problem, but it taxes you every month afterward. Which one hurts less depends on how long you stay. Run both versions with your loan officer before you commit.
Stacking the Levers: A Walk-Through
Consider a scenario with no dollar figures, only percentages and order of operations.
Say you are buying your first home on a VA loan with 100% financing and no down payment. You are on active duty with a COE in hand. You have a modest savings cushion but not enough to cover everything.
Step one: you choose to finance the funding fee. Your cash to close drops immediately, and the loan balance rises by the fee amount.
Step two: your offer asks the seller to pay customary closing costs. The seller counters, agreeing to cover some, not all.
Step three: the remaining gap is covered by your savings. You skip the lender credit because you plan to stay in the home for a long stretch.
Step four: you compare your Loan Estimate to your Closing Disclosure. If anything changed meaningfully, you ask the lender to explain it. The CFPB advises doing exactly that.
The order matters. Lock in the cap-sensitive items first, so concessions go where they help most. Then use credits and cash to fill what remains.
Active-Duty Specifics (Where the General Rules Bend)
Active duty changes the timing and the paperwork more than the rules.
Eligibility. Active-duty members generally qualify after 90 continuous days of service, per VA’s eligibility page. A statement of service signed by a commander, adjutant, or personnel officer replaces the discharge paper, since you have not been discharged. Confirm the details on va.gov, because VA decides your COE.
Reserve and Guard. The eligibility routes differ from active duty. The Army benefits portal describes the Army Reserve route as 90 continuous days after Initial Active Duty Training for members on active duty. Guard rules should be confirmed directly with VA.
Funding fee exemptions with deadlines. The funding fee is waived for veterans receiving compensation for a service-connected disability, and certain others. Per VA News, the exempt groups include:
- Those receiving VA compensation for a service-connected disability.
- Those eligible for that compensation but receiving retirement or active-duty pay instead.
- Certain recipients of Dependency and Indemnity Compensation.
- Those with a proposed or memorandum pre-discharge rating before the closing date.
- Active-duty Purple Heart recipients who present evidence on or before the closing date.
The last two matter for you. A pre-discharge disability rating and a Purple Heart both have a hard deadline: the closing date. If you are close to either, tell your loan officer early. Missing the deadline by a day can mean paying a fee you could have avoided.
Subsequent use. If you used VA before and entitlement was never restored, you may land in the higher 3.3% tier. It is not an issue for a true first use, but it is worth confirming on your COE.
Remote and short-notice closings. Orders do not wait for the title company. Tell your loan officer and agent about your reporting date at the start, so contract terms and document signing line up with your reality. Whether a given lender and title company can accommodate remote signing is a question to ask upfront.
Practitioner note. Across the wholesale programs Lendmire places VA files with, the files that go smoothly on cash to close are the ones where the buyer settled the funding-fee question and the seller-credit language before the offer went in, not after the appraisal came back.
How to Write the Request Into Your Offer
Treat it as a contract term, not a favor. A seller contribution must appear in the purchase agreement, so verbal agreements do not count.
Ask your agent to state the dollar or percentage amount, name what it covers, and say whether it is customary closing costs, concessions, or both. Keep the funding fee on its own line if you can. Then your lender can confirm how each piece counts toward the 4 percent cap.
An agent who has never sold to a VA buyer may be nervous. A short explanation helps: VA permits seller-paid costs, and the lender documents everything on the Closing Disclosure. Another option is to ask for a price reduction instead of a credit. A lower price shrinks the loan, though it only works if the appraisal supports the number.
If the Seller Won’t Pay: The Fallback Plan
Plan B is a stack, not a single move.
1. Finance the funding fee to cut cash at closing.
2. Ask about a lender credit, and weigh the higher rate against how long you will hold the loan.
3. Check whether an exemption could apply to you before closing.
4. Use savings, or gift funds where the lender permits.
5. Revisit your timing. A later closing date can change prepaid amounts, and a different home may come with a more flexible seller.
Your Timeline Checklist
Follow this order, and the surprises shrink.
1. Before you shop: get your COE and talk to a loan officer about your cash-to-close picture.
2. At the offer: write seller-paid costs and concessions into the contract, with each item on its own line.
3. After the appraisal: check the Notice of Value, because it sets the reasonable value used for the concession cap.
4. At the Loan Estimate: review every fee against the allowable list.
5. Before closing: compare the Closing Disclosure to the Loan Estimate and ask about any significant change.
6. At closing: confirm the final cash to close and that any exemption paperwork has been received.
Mistakes to Avoid
- Assuming you can roll everything into the loan. On a purchase, only the funding fee can be financed.
- Spending the concession cap on the wrong item. Know which costs count as concessions.
- Vague contract language. “Closing costs and funding fee” is not the same as two clearly defined lines.
- Taking a lender credit without thinking about how long you will stay. The higher rate lasts.
- Missing an exemption deadline. Disability ratings and Purple Heart evidence must be in before closing.
- Ignoring junk fees. Only scheduled charges are allowed. Ask your lender to explain anything unfamiliar.
Frequently Asked Questions
Does a VA loan cover closing costs?
No, not automatically. A VA purchase loan removes the down payment requirement and carries no mortgage insurance, but closing costs still apply. You cover them with seller contributions, lender credits, a financed funding fee, or your own cash. Final amounts depend on the lender, the property, and your file.
Can I roll closing costs into my VA loan?
Only the funding fee. On a purchase, closing costs and prepaids may not be included in the loan. Financing the fee lowers your cash at closing but raises your loan balance and monthly payment. Refinances follow different rules.
Can the seller pay all my closing costs?
Sometimes. VA permits sellers to pay customary closing costs and to contribute concessions up to 4 percent. Payment is negotiated and never required. The contract must spell it out, and your lender documents it on the Closing Disclosure.
Who is exempt from the funding fee?
Veterans receiving VA compensation for a service-connected disability are exempt, along with the other groups VA lists. Active-duty members with a proposed or memorandum pre-discharge rating before closing may qualify, and so may active-duty Purple Heart recipients who present evidence on or before the closing date. Your COE and VA decide.
What if I am deployed or on short-notice orders when I buy?
Tell your loan officer and agent at the start. Your reporting date shapes the contract terms, your signing arrangements, and how much cash you want on hand. Confirm early that the lender and title company can handle your situation. Everything remains subject to lender guidelines and full file review.
If you are buying a home and want to see whether a VA loan fits your file, Lendmire can help you compare the options and what each one asks of the file. You can start with the VA loan programs page.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
5. CFPB Closing Disclosure explainer
This article is part of Lendmire’s VA loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a First-Time VA Loan Buyer on Active Duty Have the Spouse Occupy? · VA Loan vs Conventional Loan for a First-Time Active-Duty Buyer · VA Loan Reserve Requirements for a First-Time VA User on Active Duty
Brandon Miller
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.