Who pays for VA loan closing costs in Texas? The quick answer: You, as the VA borrower, are responsible for the VA funding fee unless you’re exempt. Many other closing costs are negotiable between the buyer and seller.
You can significantly reduce your out-of-pocket expenses by financing the VA funding fee into the loan and combining lender credits with eligible seller concessions.
Keep reading to know the typical closing costs on a VA home loan and who covers them.
Mortgage closing costs are fees and expenses required to finalize a home loan and legally transfer the property ownership from the seller to the buyer.
They are payments for services provided by various professionals who work behind the scenes to make your home purchase a success, from appraisers and title companies to attorneys.
Closing costs help ensure:
VA loan closing costs often range anywhere between 3% and 5% of the loan amount.
Whether you’re buying, building, or improving a home, you’re responsible for paying VA loan closing costs.
However, you may negotiate with the seller to cover some of these costs.
For VA home loans, there’s a mandatory VA funding fee, a one-time payment that you pay to the U.S. Department of Veterans Affairs unless you qualify for an exemption.
Pro Tip: Before deciding, ask your lender to run the numbers for financing the funding fee versus paying it in full to compare the monthly payment, total interest, and long-term costs.
The origination fee has a 1% cap on the total loan amount. For example, you can pay up to $3,000 on a $300,000 loan.
The limit applies to the lender’s loan origination costs, including processing, underwriting, application, and document preparation.
Remember: Your lender can either charge a flat origination fee or itemize the fees. In either case, the total origination charges cannot exceed 1% of the loan amount. If the lender charges the full 1% flat fee, they’re not allowed to add any separate loan production fees on top of it.
Here are other common VA closing costs veterans may pay, which vary depending on the loan, lender, property, and location:
Pro Tip: If you don't understand any fees, ask your lender or loan officer to explain what they cover before closing, so you don't pay what you shouldn't.
In addition to the 1% origination fee rule, VA limits the fees and charges veterans may pay to protect them from excessive or unallowed closing costs.
VA borrowers don’t have to pay:
Remember: VA lenders may only charge fees that VA allows. They cannot charge you for non-allowable costs. Be sure to review your Closing Disclosure carefully to check for unusual lender-imposed charges.
Can the seller pay all VA loan closing costs? Yes, VA allows sellers or builders to provide credits, covering a portion or all of your normal closing costs.
A first-time homebuyer in Texas shared that she purchased a new construction home with zero cash to close after the builder, who was also the seller/agent, covered her closing costs.
There’s no limit to seller/builder credits as long as they cover standard loan closing costs, such as:
VA allows seller concessions up to 4% of the home’s reasonable value, which you can find in the VA Notice of Value provided by your lender.
Seller concessions refer to extra seller-paid costs outside normal closing costs, such as:
Pro Tip: Try to negotiate seller concessions to lower your upfront expenses. You may be able to close the loan with little upfront cash when market conditions favor buyers, especially when inventory is high, the property has been on the market for a while, or builders offer attractive closing cost incentives on new homes.
Here’s a quick example of VA loan closing costs on a $300,000 VA purchase loan, where:
|
Home’s VA reasonable value |
$300,000 |
|
VA funding fee (2.15%, first use) |
$6,450 |
|
Lender loan and fees |
$3,000 |
|
Third-party closing costs |
$4,000 |
|
Prepaids and escrow deposits |
$3,500 |
|
Total estimated upfront costs before credits |
$16,950 |
|
Negotiated seller credits for normal closing costs |
$5,000 |
|
Seller concessions for the VA funding fee |
$3,000 |
|
Lender credits |
$1,500 |
|
Total estimated credits and concessions |
$9,500 |
|
Upfront costs |
$16,950 |
|
Credits and concessions |
$9,500 |
|
Estimated buyer cash to close |
$7,450 |
|
Estimated buyer cash to close if the borrower finances the remaining VA funding fee |
$4,000 |
The amount of your closing costs depends on the lender, loan amount, loan type, county, and whether you’re exempt from the VA funding fee.
Your lender will give you a Loan Estimate (LE) within three business days of receiving your complete VA loan application.
It’s a standardized, three-page document outlining your loan terms, estimated monthly payments, and a list of all your estimated closing costs. It helps you compare offers and understand the exact costs involved in the home purchase.
Your Closing Disclosure will detail your final closing costs.
Pro Tip: Be sure to review your Loan Estimate carefully before signing to spot mistakes and avoid any fee surprises.
Follow these smart, cost-saving tips to reduce your upfront expenses:
After helping many Texas buyers with VA loans, I’ve seen how the process feels much easier when you choose a trusted mortgage expert and know your estimated cash to close before making an offer.
Reach out to us if you need guidance with your VA loan application.
Our experienced loan officers at Texas United Mortgage will explain the options that best fit your financial situation and goals, including down payment and closing cost assistance programs that work with VA loans in Texas.