VA Loan Closing Costs: Non-Allowable Fees and What You Actually Pay

This is the part unique to VA lending, and it's the reason a VA closing can cost a veteran less than the headline fee schedule suggests.

VA limits what a lender may charge the veteran. Where a lender opts for the flat 1% origination fee, that fee is intended to cover their internal overhead — and they generally cannot then charge separately for items such as application fees, document preparation, processing, underwriting administration, rate lock fees, postage, notary, or similar routine costs.

Third-party costs sit outside the cap and are still yours: appraisal, title work, recording fees, credit report, survey where required, and prepaid escrow. The 1% rule constrains lender charges, not the whole transaction.

VA is comparatively generous on seller contributions, which matters because a veteran using the $0-down benefit often has limited cash for closing.

VA distinguishes two things:

• Seller concessions — up to 4% of the loan amount. This covers items like paying the funding fee, prepaying taxes and insurance, or paying off a buyer's judgments or debts. Compare that to the conventional 3% cap for buyers putting under 10% down.
• Customary closing costs paid by the seller — paying the veteran's ordinary closing costs generally isn't counted against the 4% concession limit, since these are treated as normal transaction costs rather than concessions.

In practice that gives a VA buyer more room to negotiate seller help than a conventional buyer with the same down payment. Worth asking for — see getting the seller to pay closing costs for how to structure the request.

VA loans have a reputation for closing slowly. It's largely outdated, though two genuine differences remain.

Most VA purchase loans close on a broadly similar timeline to conventional loans. What can add time:

• The VA appraisal. It's ordered through VA and assigned to a VA-approved appraiser, which can take longer than a conventional appraisal in areas with few approved appraisers.
• Minimum Property Requirements. VA appraisals assess whether the home meets MPRs for safety and habitability. If repairs are required, they generally must be completed before closing — and that's a genuine source of delay, particularly on older properties.
• Certificate of Eligibility. Usually fast, sometimes not if records need correcting. Request it early.

None of these are reasons to expect a slow closing by default, but they are reasons to start the appraisal and COE steps promptly rather than late.

On earnest money: VA doesn't require it, but sellers generally do, and a VA offer with no earnest money is weaker than a competing offer with it. It's credited back to you at closing like any other transaction.

What are VA non-allowable fees?

Charges a lender cannot pass to the veteran. Where a lender takes the flat 1% origination fee, that fee is meant to cover internal overhead, so items such as application fees, document preparation, processing, rate lock fees, postage and notary charges generally cannot also be billed separately. Someone still pays — the lender, seller or agent absorbs them.

Can closing costs be included in a VA loan?

The funding fee can be financed into the loan on both purchases and IRRRLs. Most other closing costs generally cannot be added to a VA purchase loan, though they can typically be included on a VA refinance. Seller concessions and lender credits are the usual routes to reducing cash at closing on a purchase.

Do disabled veterans pay closing costs on VA loans?

Veterans receiving VA disability compensation are exempt from the funding fee, which is often the largest single charge — but they still pay ordinary closing costs such as title work, appraisal, recording fees and prepaid escrow. The exemption covers the funding fee specifically, not the whole closing.

How much can a seller contribute on a VA loan?

Seller concessions can reach 4% of the loan amount, covering items like the funding fee, prepaid taxes and insurance, or paying off buyer debts. Separately, a seller paying the veteran's customary closing costs generally isn't counted against that 4% limit. This is more generous than the conventional 3% cap for low-down-payment buyers.

Who pays for the VA appraisal?

Usually the veteran, though it can be negotiated to the seller. The fee follows a schedule set by the VA regional office rather than being set by the lender.

How long does a VA loan take to close?

Broadly similar to a conventional loan in most cases. Two things can add time: the VA appraisal is assigned through VA and may take longer where approved appraisers are scarce, and any repairs required to meet Minimum Property Requirements generally must be completed before closing. Requesting your Certificate of Eligibility early avoids a third potential delay.