VA Loan Closing Costs: Funding Fee, Seller Concessions & Broker Fees

VA loan closing costs generally run 3% to 5% of the purchase price, but federal rules limit which fees a veteran can be charged, what the lender can mark up, and how much a seller can contribute. The VA funding fee is usually the largest single cost, and it’s the only closing charge that can be rolled into the loan balance. Seller concessions are capped at 4% of the home’s appraised value, though standard closing costs a seller agrees to cover don’t count against that cap. A 2024 policy change also lets veterans pay their own buyer-broker fees for the first time, which opens up new ways to negotiate who pays what.

Fees a Veteran Is Allowed to Pay

Federal regulation 38 CFR 36.4313 works as a whitelist: if a fee isn’t on the approved list, the veteran can’t be charged for it. The lender may charge a flat origination fee of up to 1% of the loan amount, and that 1% is a ceiling covering all the lender’s miscellaneous costs, including document preparation, postage, and internal processing.

On top of the 1% origination fee, a veteran can pay reasonable and customary amounts for:

The VA appraisal fee, set by the VA and running roughly $650 to $1,500 depending on state, county, and property type
Credit report fee
Recording fees and government transfer taxes
Title examination and title insurance
Survey, if required by the lender or requested by the veteran
Hazard insurance
Flood zone determination, if performed by a qualified third party
Prepaid taxes and the initial escrow deposit
The VA funding fee

That’s the complete list of allowable charges on a purchase loan.¹

Fees a Veteran Cannot Be Charged

The most common non-allowables are lender attorney fees, document preparation by the lender’s own attorney, and any settlement or closing fee that pushes the lender’s total charges past the 1% origination cap. If the lender requires an inspection beyond the VA appraisal, the lender pays for it, not the veteran. The lender must certify compliance with these limits before the VA will guarantee the loan.¹

Some states have local variances that let veterans pay a fee normally treated as non-allowable. Several states, for example, permit attorney fees as an allowable charge, and some allow closing protection letters or escrow fees on refinances. The VA publishes a state-by-state deviations list.² When you review your Loan Estimate, check any charge you don’t recognize against the whitelist and, if it’s not there, ask whether your state permits it.

The VA Funding Fee

The funding fee is a one-time charge that supports the VA loan program, and it’s usually the biggest closing cost. It’s also the only closing cost that can be financed into the loan balance instead of paid in cash.³

On a purchase, the rate depends on whether you’ve used your VA loan benefit before and how much you put down:

First use, less than 5% down: 2.15%
First use, 5% to 9.99% down: 1.5%
First use, 10% or more down: 1.25%
Subsequent use, less than 5% down: 3.3%
Subsequent use, 5% to 9.99% down: 1.5%
Subsequent use, 10% or more down: 1.25%

On a $350,000 zero-down first-use purchase, the fee is $7,525. Rolling it into the loan means you’d borrow $357,525 and pay interest on the fee for the life of the mortgage, so if you have the cash, paying it at closing usually costs less over time.³

Other loan types carry different rates. Interest Rate Reduction Refinancing Loans and loan assumptions are 0.5%. Cash-out refinances follow the same 2.15% / 3.3% first-use and subsequent-use structure as purchases.³

Who Owes No Funding Fee

Several groups are exempt:

Veterans receiving VA disability compensation for a service-connected condition
Veterans eligible for disability compensation who take retirement or active-duty pay instead
Surviving spouses receiving Dependency and Indemnity Compensation
Service members with a pre-discharge disability claim who have a proposed or memorandum rating before closing
Active-duty Purple Heart recipients who provide evidence on or before the closing date

If you’re awarded disability compensation after closing with an effective date that predates the loan, you can request a refund by calling the VA regional loan center at 877-827-3702. A proposed or memorandum rating issued only after closing does not qualify for a refund.³

Discount Points

Discount points sit outside the 1% origination cap and can be paid by any party. On a standard home purchase, the veteran generally cannot pay discount points directly unless the seller is legally prohibited from paying them; veteran-paid points are more commonly available on refinances, home improvement loans, or construction on land the veteran already owns.¹ Seller-paid discount points count as a normal closing cost rather than a seller concession⁴, so if you want to buy down the rate, negotiating for the seller or lender to pay the points is the efficient route.

Seller Concessions and the 4% Cap

VA guidelines separate normal closing costs from seller concessions, and the distinction is worth understanding before you write an offer.

Normal closing costs a seller agrees to cover, such as the appraisal fee, title insurance, or recording fees, do not count against any cap. The seller can pay as much of those as the two of you agree to.

Seller concessions are contributions that go beyond routine transaction fees. Typical examples include the seller paying off the veteran’s credit card or car loan so they qualify for the mortgage, funding a temporary interest rate buydown, or providing cash for appliances. Concessions are capped at 4% of the home’s reasonable value as set by the VA appraisal.³

Because the two categories are separate, a seller can pay thousands in standard closing costs plus another 4% in concessions toward debt payoffs or a buydown. If the total concessions exceed 4%, the lender has to reduce the loan amount to bring the transaction back into compliance, which can derail a deal close to closing.

Temporary buydowns funded by the seller or builder are concessions and fall inside the 4% ceiling.⁵ A 2-1 buydown on a larger loan can eat most of that room, so if you also want the seller to pay off a car loan, the numbers may not fit.

Buyer-Broker Fees

Before August 2024, veterans generally could not pay a buyer’s agent commission, which caused problems when sellers stopped compensating buyer agents through the listing. VA Circular 26-24-14 authorized a temporary local variance letting veterans pay reasonable and customary buyer-broker fees, and the circular has no set expiration.⁶

The rules are strict. You must have a signed buyer-broker representation agreement in place before the transaction proceeds, and lenders must keep it in the loan file. The fee must be reasonable and customary for your local market. It cannot be financed into the loan; you either pay it from your own funds at closing or negotiate for the seller to pay it. The amount you pay must appear in lines 1 through 3 of Section H on the Closing Disclosure.⁶

Here’s the piece that matters for negotiation: when the seller pays the buyer-broker commission, the VA does not treat it as a seller concession. A seller can pay a 2.5% buyer-agent commission and still offer the full 4% in concessions toward debt payoffs or a rate buydown.⁶ Getting the seller to cover your agent’s fee usually preserves both your cash and your concession room.

Repairs Flagged by the VA Appraisal

A VA loan requires the property to meet Minimum Property Requirements before closing. The appraisal checks for working mechanical systems, adequate heating, safe and potable water, proper sewage disposal, a sound roof, adequate ventilation, working electricity, and enough living space for the home’s use.⁷ If the appraiser flags deficiencies, they must be corrected before the loan can close.

The seller usually pays for required repairs, but the veteran is allowed to pay for repairs needed to meet VA standards.⁸ Building repair costs into your offer strategy, or negotiating who pays for potential findings, keeps you from being surprised after the appraisal comes back.

Checking Your Numbers Before You Sign

Once you’re under contract, the lender issues a Loan Estimate breaking down every expected fee, your projected monthly payment, and the cash needed at closing. Read every line against the allowable-fee list. If a charge doesn’t appear on the VA’s whitelist and your state has no variance for it, raise it with the lender before closing rather than after.

The purchase agreement should say precisely which costs the seller will pay and, when the seller is contributing, whether each item is a normal closing cost, a concession, or a buyer-broker commission. Vague contract language is where deals fall apart in underwriting. Your lender and agent should both confirm the numbers keep concessions inside the 4% cap.

The Closing Disclosure arrives at least three business days before signing and gives the final accounting.⁹ Compare it line by line to the Loan Estimate. Small changes are normal. Unexplained jumps in fees are a conversation to have before you sign, not after.

1
eCFR. 38 CFR 36.4313 – Charges and Fees
2
U.S. Department of Veterans Affairs. VA State Fees and Charges Deviations List
3
U.S. Department of Veterans Affairs. VA Funding Fee and Loan Closing Costs
4
U.S. Department of Veterans Affairs. VA Home Loan Guaranty Buyers Guide
5
U.S. Department of Veterans Affairs. Temporary Buydowns
6
Department of Veterans Affairs. VA Circular 26-24-14 – Temporary Local Variance for Certain Buyer-Broker Charges
7
U.S. Department of Veterans Affairs. VA Basic MPR Checklist
8
U.S. Department of Veterans Affairs. Circular 26-18-6 – Loans for Alteration and Repair
9
Consumer Financial Protection Bureau. Closing Disclosure Explainer