FAQ VA Loan Closing Cost

Are There Closing Costs on a VA Loan?


Short answer: Yes. But you probably want more information than that, so we’ll cover some basic information on what closing costs can exist on a VA loan. We’ll talk about closing costs that the borrower is allowed to pay, and closing costs that the borrower is not allowed to pay. The VA does its best to protect its borrowers from unethical practices and overcharging, while still keeping up with industry standards and making VA loans attractive and profitable for lenders.Are There Closing Costs on a VA Loan?


The first item that will be included in closing costs for any VA loan is the VA funding fee. The purpose of the VA funding fee is to defray the cost of the VA loan program to taxpayers. With only a few exceptions, every VA-eligible borrower must pay the VA funding fee at closing. The funding fee varies based on whether the borrower served in the regular military or the Guard/Reserves, as well as how much of a down payment was made on the loan. At the moment, the highest the funding can get for a first-time use is 2.4%, and the highest for a subsequent use is 3.3%. The lowest for both first-time use and subsequent use is 1.25%. While the funding fee can either be paid in cash or financed, it is due in its entirety at the time of closing.


For a veteran who served in the regular military and made a 5% down payment, the funding fee would be 1.5%. On a $200,000 loan, that would be $3,000. In addition to the funding fee, the lender is also permitted to charge a 1% flat fee. In the case of this veteran, that fee would be $2,000. The veteran is also permitted to pay “reasonable” discount points as desired, and a set of itemized fees and charges, as long as those fees and charges are a reasonable amount. The VA provides a simple chart that lists and describes the allowable fees that a VA borrower can be charged:

Charge Description
  • Appraisal and Compliance Inspections
  • The veteran can pay the fee of a VA appraiser and VA compliance inspectors
  • The veteran can also pay for a second appraisal if he or she is requesting reconsideration of value
  • The veteran cannot pay for an appraisal requested by the lender or seller for reconsideration of value.
  • The veteran cannot pay for appraisals requested by parties other than the veteran or lender.
  • Recording Fees
The veteran can pay for recording fees and recording taxes or other charges incident to recordation.
  • Credit Report
The veteran can pay for the credit report obtained by the lender.For Automated Underwriting cases, the veteran may pay the evaluation fee of $50 in lieu of the charge for a credit report.

For “Refer” cases, the veteran may also pay the charge for a merged credit report, if required.

  • Prepaid Items
The veteran can pay that portion of taxes, assessments, and similar items for the current year chargeable to the borrower and the initial deposit for the tax and insurance account.
  • Hazard Insurance
The veteran can pay the required hazard insurance premium. This includes flood insurance, if required.
  • Flood Zone Determination
The veteran can pay the actual amount charged for a determination of whether a property is in a special flood hazard area, if made by a third party who guarantees the accuracy of the determination.
The veteran can pay for a charge for a life-of-the-loan flood determination service purchased at the time of loan origination.
A fee may not be charged for a flood zone determination made by the lender or a VA appraiser.
  • Survey
The veteran can pay a charge for a survey, if required by the lender or veteran. Any charge for a survey in connection with a condominium loan must have the prior approval of VA.
  • Title Examination and Title Insurance
The veteran may pay a fee for title examination and title insurance, if any.
If the lender decides that an environmental protection lien endorsement to a title policy is needed, the cost of the endorsement may be charged to the veteran.
  • Special Mailing Fees for Refinancing Loans
For refinancing loans only, the veteran can pay charges for Federal Express, Express Mail, or a similar service when the saved per diem interest cost to the veteran will exceed the cost of the special handling.
  • VA Funding Fee
Unless exempt, each veteran must pay a funding fee to VA.
  • Mortgage Electronic Registration System Fee
The veteran may pay a fee for MERS. MERS is a one-time fee for the purpose of electronically tracking the ownership of the beneficial interest in a loan and its servicing rights.
  • Other Fees Authorized by VA
Additional fees attributable to local variances  may be charged to the veteran only if specifically authorized by VA. The lender may submit a written request to the Regional Loan Center for approval if the fee is normally paid by the borrower in a particular jurisdiction and considered reasonable and customary in the jurisdiction.

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