A VA mortgage offers a tantalizing benefit for current and veteran military members: No down payment is required.

But you'll still owe closing costs to finalize a home loan backed by the U.S. Department of Veterans Affairs.

Don't let these final costs scare you off from buying a home — or catch you off guard.

How much are VA loan closing costs?

Closing costs include the various fees required to settle a home loan. Generally, closing costs range from about 2% to 6% of the loan amount.

Like other mortgages, VA loan closing costs include such fees as:

  • An appraisal fee. For a VA loan, the appraisal estimates the home's value and determines whether the property meets the VA's minimum standards. The VA limits how much appraisers can charge.

  • Discount points, which are optional fees you can pay to lower the interest rate.

  • Government recording fees to update local property ownership records.

  • Loan origination charges for underwriting and processing the loan. 

  • Local and state taxes.

  • Prepaid expenses, such as home insurance and property tax.

  • Title-related costs, which may include title insurance, title search fee and others.

VA funding fee

VA loans don't include mortgage insurance. But they do include a special charge called the VA funding fee. The fee helps cover the VA's costs for guaranteeing loans. If a borrower defaults on a loan, the VA repays the lender a portion of the outstanding balance. The guarantee allows lenders to offer VA loans at competitive rates without requiring a down payment.

For purchase loans, the VA funding fee depends on the size of your down payment and whether this is your first or a subsequent VA mortgage.

The fee for a first purchase or construction loan is 2.15% of the loan amount with a down payment of less than 5%; it's 1.5% with a down payment of 5% up to 10%; and 1.25% with a down payment of 10% or more.

Funding fee for a first purchase or construction loan

Down payment

Funding fee

Less than 5%

2.15%.

5%-9.9%

1.5%.

10% or more

1.25%.

The VA funding fee for a subsequent purchase or construction loan is 3.3% of the loan amount with a down payment of less than 5%; it's 1.5% with a down payment of 5% up to 10%; and 1.25% with a down payment of 10% or more.

Funding fee for a subsequent purchase or construction loan

Down payment

Funding fee

Less than 5%

3.3%.

5%-9.9%

1.5%.

10% or more

1.25%.

Refinancing? The VA funding fee for a VA cash-out refinance is 2.15% for a first loan and 3.3% for a subsequent loan. The fee for an Interest Rate Reduction Refinance Loan, or IRRRL (pronounced “Earl”), is 0.5% for a first or subsequent loan.

Funding fee for VA refinance loans

Loan type

Down payment

Cash-out refinance, first use

2.15%.

Cash-out refinance, subsequent use

3.3%.

Interest Rate Reduction Refinancing Loan, or IRRRL

0.5%.

Some borrowers are exempt from the VA funding fee, including:

  • Veterans who are eligible for compensation for service-connected disabilities.

  • Service members on active duty who have received a Purple Heart.

  • Surviving spouses who are receiving dependency and indemnity compensation.

Closing cost limits

The VA prohibits and limits some fees for borrowers.

Attorney fees: Lenders can't make you pay attorney fees, except for title work, although you can hire and pay for a real estate attorney on your own.

Loan origination charges: Lenders cannot charge more than 1% of the loan amount for purchase mortgages. For construction loans, lenders can charge up to an additional 2% of the loan amount; the allowed amount depends on how much the lender advances to the veteran or supervises the project.

Seller-paid fees: Sellers must pay these fees when you buy a house:

  • Real estate agent commissions and brokerage fees.

  • Buyer broker fee.

  • Termite report fee.

How to limit out-of-pocket VA loan closing costs

Here are some ways to lower your upfront closing costs.

  • Ask the seller to pay some of your closing costs. The VA limits the amount the seller can pay to no more than 4% of the loan amount. However, note that sellers may not be willing to pay in a competitive real estate market. Work with your real estate agent to decide how to negotiate.

  • Get help through a closing costs assistance program. Many states offer programs for first-time home buyers, including zero-interest loans and grants to cover closing costs. 

  • Roll the VA funding fee into the loan. This will cut your upfront out-of-pocket costs, but it will increase your monthly mortgage payment.