Essential Guide to VA Loan Closing Costs and Funding Fees

You’ve probably heard one of the biggest benefits of a VA home loan. You may be able to buy a home with zero down payment.

Additionally, many buyers wonder how these costs fit into their overall planning. Understanding VA loan closing costs helps buyers budget for the purchase and compare lenders’ offers. This knowledge supports a clearer path to a confident home purchase. It can also reduce surprises at closing.

And that’s a pretty amazing benefit.

But here’s where things can get a little confusing.

However, no upfront payment does not necessarily mean no dollars out of pocket for VA loan closing costs.

I know, I know. Nobody likes hearing about additional expenses when they’re excited about buying a house!

However, you should understand the numbers before you fall in love with a home.

Additionally, be sure to review VA loan closing costs before you decide to buy.

First, let’s discuss what closing costs may include. We will identify expenses you can avoid. We will cover typical items and their timing. Understanding these costs helps you plan. This overview sets expectations for your loan process. You can ask questions at any stage.

Additionally, we will highlight expenses you may avoid or reduce. We review potential credits, fees, and interest implications. This helps you plan a smoother, more affordable closing. We will review VA loan closing costs and options to lower them.

Zero Down Payment vs. Zero Cash to Close

First, let’s clear up an important distinction.

A down payment is the amount of your own money you’re putting toward the purchase price of the home. It brings the loan amount DOWN. It shouldn’t be confused with a deposit.

Closing costs are the expenses associated with obtaining your mortgage and completing the real estate transaction.

Those are two different things!

One of the greatest advantages of a VA loan is that eligible borrowers with sufficient entitlement may be able to finance 100% of the home’s eligible purchase price.

But that doesn’t eliminate expenses such as title fees, property insurance, taxes, or other settlement costs.

The good news? There may be ways to reduce those out-of-pocket expenses.

And that’s where planning ahead really matters.

What Is the VA Funding Fee?

The VA funding fee is a one-time fee that helps support the VA home loan program.

The amount depends on several factors, including:

• Whether this is your first or subsequent use of your VA benefit
• The type of VA loan
• Whether you’re making a down payment
• Whether you qualify for a funding fee exemption

For a VA purchase loan, eligible borrowers can generally finance the funding fee into the mortgage rather than paying it out of pocket at closing.

How Much Is the VA Funding Fee?

For borrowers who are not exempt, the current VA purchase loan funding fee rates are:

Down Payment	First Use	Subsequent Use
Less than 5%	2.15%	3.30%
5% to less than 10%	1.50%	1.50%
10% or more	1.25%	1.25%

For example, if you’re purchasing a $250,000 home with no down payment and using your VA benefit for the first time, a 2.15% funding fee would be $5,375.

If that fee is financed, your starting loan balance would be $255,375 rather than $250,000.

That also means you’ll pay interest on the financed fee over time.

These rates are subject to change, so you can always find the current schedule on the VA’s official Funding Fee and Closing Costs page.

Who Is Exempt From the VA Funding Fee?

Here’s something I really want veterans to know:

You may not have to pay the funding fee at all!

Certain borrowers are exempt, including qualifying veterans receiving VA disability compensation, veterans eligible to receive disability compensation but receiving retirement or active-duty pay instead, certain surviving spouses receiving Dependency and Indemnity Compensation, and active-duty service members who have received a Purple Heart.

Other specific exemptions may apply as well.

And here’s another important consideration: If you have a qualifying VA disability claim pending, your funding fee situation may need additional review.

In some circumstances, borrowers who paid a funding fee may qualify for a refund if their disability compensation is later awarded with an effective date that meets VA requirements.

Don’t assume you’re exempt, but don’t assume you owe it either!

We’ll verify your funding fee status as part of the loan process.

What Other Closing Costs Should VA Buyers Expect?

Even without a down payment, there may still be expenses associated with purchasing your home.

Depending on your transaction, these can include:

Lender and Loan-Related Fees

These may include allowable loan origination charges, credit reports, discount points, and other permitted financing expenses.

VA guidelines place restrictions on certain fees that veterans can be charged, so we’ll review the details carefully.

Appraisal and Property-Related Expenses

VA loans generally require a VA appraisal.

Depending on the property and its location, additional inspections or property-related requirements may apply.

For example, applicable VA-financed properties in Oklahoma are subject to the VA’s wood-destroying insect inspection requirements.

Title and Settlement Expenses

These can include title insurance, settlement services, recording charges, and other expenses associated with transferring ownership of the property.

Prepaid Expenses and Escrow Accounts

This is an area that sometimes surprises homebuyers.

You may need to pay your first year of homeowners insurance, prepaid interest, property taxes, or funds to establish your initial escrow account.

These aren’t all necessarily lender fees. Some are expenses you’d have as a homeowner regardless of the financing program.

And if terms like escrow and prepaid interest are starting to sound like a foreign language, I’ve got you covered!

Visit my Mortgage Terms to Know page for plain-English explanations.

Can the Seller Pay My VA Loan Closing Costs?

YES! And this is one of my favorite things to help buyers understand.

You may have heard that sellers are limited to contributing 4% toward a VA buyer’s closing costs.

But that’s not quite accurate and is seen a little differently by the VA than by other programs.

The VA’s 4% limit applies to certain seller concessions, not every ordinary closing cost the seller may agree to pay.

For example, the seller may be able to pay allowable ordinary closing costs and certain discount points without those payments counting toward the 4% concession limit.

Other items, such as paying the buyer’s VA funding fee, paying off certain debts, or funding a temporary interest-rate buydown, may count as seller concessions.

The distinction matters!

And it means we may have opportunities to negotiate assistance with your closing expenses that you didn’t realize existed.

Of course, seller contributions are negotiated as part of the transaction. They aren’t guaranteed, and all credits must meet applicable loan requirements.

That’s why I encourage buyers and real estate agents to talk with me about the financing details before writing the offer.

A well-structured contract can make a meaningful difference.

What About Earnest Money and Home Inspections?

Here’s another question I hear:

“If I’m buying with zero down, do I still need earnest money?”

Possibly!

An earnest money deposit is money you may provide when you enter into a purchase contract to demonstrate your commitment to the transaction. It’s not necessarily REQUIRED though, and your realtor can help you determine if it makes for a stronger offer.

If it’s correctly sourced, it can be credited toward your required funds at closing, subject to your contract terms, and if all contract terms are met and it can’t be sourced, then it will generally be given back to you at closing as a check.

It’s not an additional fee that automatically disappears.

You may also choose to pay for a professional home inspection during the purchase process.

Remember, a VA appraisal is not the same thing as a home inspection.

I encourage buyers to consider having a qualified inspector evaluate the property before completing their purchase.

Can I Roll All My Closing Costs Into My VA Loan?

For a standard VA purchase loan, you generally cannot simply add all your closing costs to the loan balance.

The VA funding fee is the major exception when financing it is permitted.

Other closing expenses may be addressed through allowable seller contributions, lender credits, assistance programs, or your own available funds.

That doesn’t mean we’ll automatically have every option available, but it’s exactly why we review the numbers before you make an offer.

Can I Use Down Payment Assistance With a VA Loan?

In some situations, yes!

Depending on the program and your qualifications, certain assistance programs may be compatible with VA financing.

Assistance might help with eligible closing costs or other permitted expenses, even when you’re not required to make a down payment.

But not every assistance program can be combined with every loan and there are restrictions for receiving any money BACK outside normal costs that were paid during the transaction and properly sourced.

We’ll need to review the applicable rules, available funding, and your individual circumstances.

So How Much Money Will I Actually Need to Buy a Home?

That’s the question I really want to answer before you start shopping.

And the answer is different for every buyer.

Your required funds may depend on:

• The price and type of home you’re purchasing
• Your VA entitlement and funding fee status
• Your anticipated closing costs and prepaid expenses
• Whether the seller is contributing toward costs
• Available lender credits or assistance programs
• Your earnest money deposit and other expenses already paid

It’s possible for an eligible VA buyer to have very little cash required at closing.

But I never want you assuming that until we’ve actually reviewed the numbers.

Because surprises are great for birthdays.

They’re not nearly as much fun at the closing table! 😂

Let’s Build Your Home-buying Plan

If you’re a veteran, active-duty service member, or eligible surviving spouse considering a home purchase, let’s talk about what your VA benefit may make possible.

We’ll review your eligibility, estimated costs, and financing options so you have a clearer understanding of what to expect.

You don’t have to figure it all out on your own.

That’s what I’m here for!

Or call or text me at 918-316-7237.

You can also read my VA Home Loan FAQs: Your Questions Answered for answers to more common questions.

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Lisa Pinnick | Senior Mortgage Loan Officer | All Western Mortgage | NMLS #1810532

All loans are subject to VA eligibility, credit approval, property requirements, and applicable lender guidelines. The VA funding fee and other closing costs may apply. All Western Mortgage is not affiliated with or endorsed by the U.S. Department of Veterans Affairs. Additional company and state licensing disclosures may apply.

Published October 2026. Program guidelines and funding fee schedules are subject to change.