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VA BuyersPublished September 17, 2025
VA Loan Closing Costs Explained: What Veterans Really Pay
VA Loan Closing Costs Explained: What Veterans Really Pay
One of the biggest advantages of using a VA loan is the ability to buy a home with zero down payment. But many veterans are surprised to learn that they’ll still need to cover closing costs the fees and expenses required to finalize a home purchase.
The good news? VA closing costs are often lower than other loan programs, and there are even ways to reduce or shift them to the seller.
If you’re planning to buy a home in San Diego County with a VA loan, here’s what you need to know about closing costs, who pays them, and how to keep more money in your pocket.
What Are Closing Costs?
Closing costs are the one-time fees paid at the end of a real estate transaction to cover services like appraisals, title searches, and loan processing. For VA buyers, these typically range between 2% and 5% of the home’s purchase price.
Example: On a $600,000 home in Oceanside, VA loan closing costs could run between $12,000 and $30,000.
While that may sound high, remember: you’re avoiding a down payment, which can easily be $30,000–$60,000 with a conventional loan.
Typical VA Loan Closing Costs
Here’s a breakdown of the most common closing costs VA buyers may encounter:
1. VA Funding Fee
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What it is: A one-time fee paid to the Department of Veterans Affairs to keep the program sustainable.
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Amount: Typically 1.25% to 3.3% of the loan, depending on service type, down payment, and whether it’s your first use.
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Exemptions: Veterans with a service-connected disability rating are often exempt.
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Payment Options: Can be paid upfront or rolled into the loan.
2. Appraisal Fee
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Purpose: Confirms the home’s value and ensures it meets VA Minimum Property Requirements (MPRs).
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Cost: Around $700–$900 in San Diego County.
3. Origination Fee (if charged)
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Purpose: Covers lender’s processing and administrative costs.
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Limit: VA caps this at 1% of the loan amount.
4. Title Insurance & Escrow Fees
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Purpose: Protects against ownership disputes and ensures a clear transfer of title.
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Cost: Varies based on price but often $2,000–$3,500 in California.
5. Recording Fees & Transfer Taxes
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Purpose: Local government fees to record the new deed.
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Cost: A few hundred dollars depending on location.
6. Prepaid Expenses
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Includes: Homeowners insurance, property taxes, and prepaid interest.
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Cost: Varies depending on timing and local tax rates.
Who Pays VA Loan Closing Costs?
One of the unique features of VA loans is that certain fees cannot be paid by the veteran. Instead, they must be covered by the seller or lender.
VA Non-Allowable Fees (Seller or Lender Pays):
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Attorney’s fees charged by the lender.
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Prepayment penalties.
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Real estate broker/agent commissions.
Buyer’s Responsibility:
VA buyers typically cover the funding fee (unless exempt), appraisal, title insurance, and escrow fees but some of these can be negotiated.
How Sellers Can Help with Closing Costs
VA guidelines allow sellers to contribute toward a veteran’s closing costs. This is known as seller concessions.
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Maximum Allowed: Up to 4% of the home’s purchase price.
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Examples of Concessions: Paying the funding fee, covering prepaid taxes and insurance, or helping with closing costs.
San Diego Example: On a $700,000 home, a seller could contribute up to $28,000 toward your costs.
How to Reduce Your VA Closing Costs
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Negotiate Seller Credits
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Ask the seller to cover part (or all) of your closing costs as part of your purchase offer.
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Shop Around for Services
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Title insurance, escrow, and homeowners insurance costs can vary. Compare providers to save.
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Roll the Funding Fee into Your Loan
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If you’re not exempt, you can finance the funding fee rather than paying it upfront.
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Use Lender Credits
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Some lenders offer credits toward closing costs in exchange for a slightly higher interest rate.
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Check for VA Buyer Assistance Programs
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San Diego County offers programs that can help with costs for qualifying veterans and first-time buyers.
Common Misconceptions About VA Closing Costs
“VA loans have no closing costs.”
Not true. You’ll still have fees, but some can be covered by the seller or lender.
“The seller won’t accept my offer if I ask for concessions.”
In reality, seller concessions are common in San Diego County and can be negotiated into the deal, especially if your offer price is strong.
“Closing costs are the same with every lender.”
Costs vary. Always request a Loan Estimate from at least two lenders to compare fees.
Example: VA Closing Cost Breakdown on a $600,000 Home
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VA Funding Fee (first-time use, 2.3%): $13,800 (waived if exempt).
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Appraisal Fee: $800.
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Title Insurance & Escrow: $2,800.
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Recording & Transfer Fees: $400.
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Prepaid Taxes & Insurance: $3,000.
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Total Estimated Costs: $20,800.
With seller concessions, that amount could be reduced significantly.
Final Thoughts
VA loans make homeownership more affordable for veterans, but closing costs are still part of the process. The good news is that many of these expenses can be reduced, negotiated, or even eliminated with the right strategy.
If you’re a veteran buying in San Diego County, I can connect you with VA-approved lenders and help you negotiate seller credits to minimize your out-of-pocket costs.
Contact Jose Luis Tepox Jr. at (619) 485 8293 or click here.
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