VA Closing Costs and Fees Veterans Can't Be Charged

Why VA limits fees

VA wants the benefit to help Veterans, not to become a way to load them up with fees. So federal rules list the charges a Veteran may pay. Anything not on the list is generally off limits unless the lender covers it with its flat charge or someone else pays it.

What Veterans may pay

You may pay these itemized costs:

• VA appraisal and compliance inspection fees
• Credit report
• Recording fees and recording taxes
• Title exam and title insurance
• Survey, if the lender or you require one
• Hazard insurance and the first deposit into your escrow account
• Current-year taxes and assessments you owe
• Flood zone determination by a qualified third party
• Discount points you choose to pay to lower your rate
• The VA funding fee, unless you are exempt

The 1% flat charge

The lender may charge a flat fee of up to 1% of the loan amount. This one charge covers all its origination costs that are not on the list above, such as processing, underwriting and document prep. If the lender charges the 1%, it cannot also itemize those items. Some lenders skip the flat charge and list individual allowable fees instead, but the total cannot go over what VA allows. States can have approved local differences, which VA tracks in its fees and charges list.

What you cannot be charged

• Lender fees beyond the 1% flat charge that are not on VA's allowed list
• Brokerage fees for getting your VA guaranty
• Life insurance premiums paid out of loan proceeds
• Most junk fees, like separate charges for things the 1% is meant to cover

These costs do not disappear. They are paid by the seller, the lender, or through a lender credit in exchange for a slightly higher rate.

Seller concessions vs. closing costs

The seller can pay all of your normal closing costs with no VA limit. Separately, VA caps seller concessions at 4% of the home's reasonable value on the Notice of Value. Concessions are extras beyond normal costs, such as paying your funding fee, paying off your debts, or prepaying your hazard insurance.

Buyer's agent fees after the NAR settlement

Since a national real estate settlement in 2024, sellers no longer automatically pay the buyer's agent through the listing. VA used to forbid Veterans from paying their own agent. Circular 26-24-14, effective August 10, 2024, changed that:

• You may pay reasonable and customary buyer's agent fees.
• The fee cannot be added to the loan. It must be paid in cash.
• Money you pay counts as cash you need to close, so plan for it.
• The seller can still pay your agent, and VA does not count that as a seller concession.
• Your buyer-broker agreement goes in the loan file.

VA said it plans to set a permanent policy through rulemaking. Check with your lender for the latest rule before you sign a buyer agreement.

Only the funding fee can be financed

On a purchase, you cannot roll closing costs into the loan. The funding fee is the only cost you can finance. Everything else is paid at closing by you, the seller, or a lender credit.

Step by step: keep closing costs low

1. Get Loan Estimates from at least three VA lenders on the same day.
2. Compare Section A (origination charges). Look for the 1% flat charge or itemized fees.
3. Ask for seller-paid costs in your offer. Normal closing costs do not count toward the 4% cap.
4. Negotiate your agent's fee and ask the seller to pay it.
5. Consider a lender credit if you are short on cash, but know it raises your rate.
6. Review your Closing Disclosure three days before closing and question anything new.

Bottom line

VA rules protect you from many fees, but they do not shop for you. Comparing offers and asking the seller for help are still the best ways to save.